Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in millions): January January 31, 2020 31, 2019 Current Assets Cash Accounts receivable Inventories $ 11 $ 8 11 Total current assets $ 24 $ 28 Current Liabilities Note payable Accounts payable Other accrued liabilities $ 6 $ 6 4 1 3 Total current liabilities $ 13 $ 10 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (i.e., 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) 01/31/2020 01/31/2019 Working capital Current ratio h Evaluate the firm's liquidity at each balance sheet date.
Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in millions): January January 31, 2020 31, 2019 Current Assets Cash Accounts receivable Inventories $ 11 $ 8 11 Total current assets $ 24 $ 28 Current Liabilities Note payable Accounts payable Other accrued liabilities $ 6 $ 6 4 1 3 Total current liabilities $ 13 $ 10 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (i.e., 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) 01/31/2020 01/31/2019 Working capital Current ratio h Evaluate the firm's liquidity at each balance sheet date.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in
millions):
January January
31, 2020 31, 2019
Current Assets
Cash
Accounts receivable
Inventories
$ 11
6.
7
$ 8
9.
11
Total current assets
$ 24
$ 28
Current Liabilities
Note payable
Accounts payable
Other accrued liabilities
$ 6
4
Total current liabilities
$ 13
$ 10
Required:
a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (i.e.,
10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.)
01/31/2020
01/31/2019
Working capital
Current ratio
b. Evaluate the firm's liquidity at each balance sheet date.
Based on the working capital and current ratio measures, the firm has become more liquid over the 2-year period.
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Transcribed Image Text:Required:
a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (i.e.,
10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.)
01/31/2020
01/31/2019
Working capital
Current ratio
b. Evaluate the firm's liquidity at each balance sheet date.
O Based on the working capital and current ratio measures, the firm has become more liquid over the 2-year period.
Based on the working capital and current ratio measures, the firm has become less liquid over the 2-year period.
C. Assume that the firm operated at a loss during the year ended January 31, 202O. How could cash have increased during the year?
O Changes in a firm's cash position and its profitability are not directly related under accrual basis of accounting.
O Changes in a firm's caşh position and its profitability are not directly related under cash basis of accounting.
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