12th Edition

ISBN: 9781308841380

Author: David H. Marshall, Wayne W. McManus, Daniel F. Viele

Publisher: McGraw Hill

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The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Textbook Question

Chapter 3, Problem 3.19P

Problem 3.19

LO 6

Calculate and analyze liquidity measures Following are the current asset and current liability’ sections of the balance sheets for Freedom, Inc., at January 31, 2017 and 2016 (in millions):

Current Assets	January 31,2017	January 31,2016
Cash	$15	$ 6
Accounts receivable	9	14
Inventories	18	24
Total current assets $42 Current Liabilities		$44
Note payable	$ 9	$ 9
Accounts payable	15	5
Other accrued liabilities

6 6 Total current liabilities $30 $20

Required:

Calculate the working capital and current ratio at each balance sheet date. Round your current ratio answers to one decimal place.
Evaluate the firm’s liquidity at each balance sheet date.
Assume that the firm operated at a loss during the year ended January 31, 2017. How could cash have increased during the year?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 3, Problem 3.18P

Chapter 3, Problem 3.20P

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Chapter 3 Solutions

Accounting: What the Numbers Mean

Ch. 3 - Prob. 3.1ME Ch. 3 - Mini-Exercise 3.2 LO 3 ROI analysis using the...Ch. 3 - Mini-Exercise 3.3 LO 4 Calculate ROE Firm L had...Ch. 3 - Prob. 3.4ME Ch. 3 - Mini-Exercise 3.5 LO 6 Calculate current...Ch. 3 - Mini-Exercise 3.6 LO 6 Calculate working capital...Ch. 3 - Exercise 3.7 LO 2 Compare investment alternatives...Ch. 3 - Prob. 3.8E Ch. 3 - Exercise 3.9 LO 2 Compare investment alternatives...Ch. 3 - Exercise 3.10 LO 2 Compare investment alternatives...

Ch. 3 - Exercise 3.11 LO 3 ROI analysis using the DuPont...Ch. 3 - Prob. 3.12E Ch. 3 - Prob. 3.13E Ch. 3 - Prob. 3.14E Ch. 3 - Exercise 3.15 LO 6 Effect of transactions on...Ch. 3 - Exercise 3.16 LO 6 Effect of transactions on...Ch. 3 - Calculate profitability measures using annual...Ch. 3 - Prob. 3.18P Ch. 3 - Problem 3.19 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.20 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.21 LO 3 Applications of ROI using the...Ch. 3 - Prob. 3.22P Ch. 3 - Case 3.23 LO 3. 4, 6, 2 Focus company-analysis of...Ch. 3 - Case 3.24 LO 3, 4, 6, 7 Analysis of liquidity' and...

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