Activity 9 - Vodafone Current Ratio
Work through the data for Vodafone and calculate their current ratio for the two years for which you have data.
| Vodafone Consolidated Balance Sheet |
31 March 2002 | 31 March 2001 |
|---|---|---|
| £m | £m | |
| Total Current Assets | 9,438 | 18,182 |
| Creditors: Amounts falling due within one year | 13,455 | 12,377 |
Fill in this table and discuss what you find:
| Current Ratio For Vodafone | |||
|---|---|---|---|
| 31 March 2002 | Current Assets: Current Liabilities | _____: _____ | ___: 1 |
| 31 March 2001 | Current Assets: Current Liabilities | _____: _____ | ___: 1 |
Did you get this?
Vodafone has done almost the exact opposite of the Carphone Warehouse with its current ratio.
This additional information might help your analysis.
| Current assets | 2002 £m | 2001 £m |
|---|---|---|
| Stock | 513 | 316 |
| Debtors due within one year | 7,053 | 4,587 |
| Short-term investments | 1,792 | 13,211 |
| Cash at bank and in hand | 80 | 68 |
| Total Current Assets | 9,438 | 18,182 |
| Creditors: Amounts falling due within one year | 13,455 | 12,377 |
| Net current assets (liabilities) | -4,017 | 5,805 |
Vodafone has liquidated, or sold, many of its short-term investments. This business has grown at a very rapid rate and has possibly used the cash from having sold its investments to finance that expansion. Overall, Vodafone has lost almost £10 billion of working capital as it has fallen from £5.8 billion to -£4.0. This has left Vodafone in a weak working capital position as its creditors are large but its cash and short-term assets balances are small by comparison.
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