Why differences between current and quick ratios much larger

Reference no: EM13900391

Summary financial information is provided below for BellSouth Corp., a telecommunications company, and Belk, Inc., a general department store retailer. The financial information for these companies is similar to that of most companies in the telephone communications and department store industries, respectively.

	BellSouth Corp. (in millions) Dec. 31, 2004	Belk, Inc. (in thousands) Jan. 29, 2005
	Amount %	Amount %
Cash	$ 696 12.2%	$ 232,264 21.2%
Accounts receivable	2,559 44.9%	319,706 29.1%
Merchandise inventory Materials and supplies	- - 321 5.6%	527,860 48.1% - -
Other	2,123 37.3%	17,302 1.6%
Total current assets	$ 5,699 100.0%	$1,097,132 100.0%
Accounts payable	$ 1,047 10.1%	$ 177,793 57.6%
Short-term debt	5,475 52.8%	8,199 2.7%
Other	3,848 37.1%	122,397 39.7%
Total current liabilities	$10,370 100.0%	$ 308,389 100.0%
Current ratio	0.550	3.558
Quick ratio	0.314	1.790

	BellSouth Corp.	Belk, Inc.	Difference
Current Ratio	0.550	3.558	3.008
Quick Ratio	0.314	1.790	1.476
Difference	0.236	1.768

1. Why is the current ratio of the department store 3.008 greater than the current ratio of the telecommunications company?

2. Why is the quick ratio of the department store 1.476 greater than the quick ratio of the telecommunications company?

3. Why are the differences between the current and quick ratios much larger for the department store than they are for the telecommunications company (1.768 vs. 0.236)?

Reference no: EM13900391

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