Following are the current asset and current liability sections of the balance sheets for Freedom Incorporated at January 31, 2023 and 2022 (in millions): Current Assets Cash Accounts receivable Inventories Total current assets Current Liabilities Note payable Accounts payable Other accrued liabilities. Total current liabilities January 31, January 31, 2023 2022 $30 20 40 $90 $20 30 10 $60 $10 25 45 $80 $20 10 10 $40 Required: a. Calculate the working capital and current ratio at each balance sheet date. b. Evaluate the firm's liquidity at each balance sheet date. c. Assume that the firm operated at a loss during the year ended January 31, 2023. How could cash have increased during the year?
Following are the current asset and current liability sections of the balance sheets for Freedom Incorporated at January 31, 2023 and 2022 (in millions): Current Assets Cash Accounts receivable Inventories Total current assets Current Liabilities Note payable Accounts payable Other accrued liabilities. Total current liabilities January 31, January 31, 2023 2022 $30 20 40 $90 $20 30 10 $60 $10 25 45 $80 $20 10 10 $40 Required: a. Calculate the working capital and current ratio at each balance sheet date. b. Evaluate the firm's liquidity at each balance sheet date. c. Assume that the firm operated at a loss during the year ended January 31, 2023. How could cash have increased during the year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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L 4
Transcribed Image Text:Problem 3-21 (Static) Calculate and analyze liquidity measures LO 3-6
Following are the current asset and current liability sections of the balance sheets for Freedom Incorporated at January 31, 2023 and
2022 (in millions):
Current Assets
Cash
Accounts receivable
Inventories
Total current assets
Current Liabilities
Note payable
Accounts payable
Other accrued liabilities
Total current liabilities
January 31, January 31,
2023
2022
$30
20
40
$90
$20
30
10
$ 60
$ 10
25
45
$ 80
$ 20
10
10
$ 40
Required:
a. Calculate the working capital and current ratio at each balance sheet date.
b. Evaluate the firm's liquidity at each balance sheet date.
c. Assume that the firm operated at a loss during the year ended January 31, 2023. How could cash have increased during the year?
Transcribed Image Text:Req A
Req B and C
Calculate the working capital and current ratio at each balance sheet date.
Note: Enter "Working capital" in millions of dollars (i.e., 10,000,000 should be entered as 10). Round your "Current ratio" to 1
decimal place. (e.g., 32.1)
Working capital
Current ratio
01/31/2023 01/31/2022
Show Transcribed Text
Req A Req B and C
3
c
b. Evaluate the firm's liquidity at each balance sheet date.
c. Assume that the firm operated at a loss during the year ended January 31, 2023. How could cash have increased during the
year?
b. Based on the working capital and current ratio measures, the firm has become
c. Changes in a firm's cash position and its profitability are not directly related under
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