Need help with #1 please answer all questions thank you! Question 1 fof 10) 1 10
ID: 2328917 • Letter: N
Question
Need help with #1 please answer all questions thank you!Question 1 fof 10) 1 100 points Following are the current asset and current liability sections of the balance sheets for Freedom, Inc., at January 31, 2017 and 2016 (in millions) 31,201 31.2016 Current Assets Cash Accounts receivable 18 s 42 24 s 44 Total curont assets Current Liabilities Note payable 15 Other accrued lablses Total current liablites s 30 $ 20 Required a. Calculate the working captal and current rato at each balance sheet date. (Enter "Working capital" in milions of dolars (Le. 10,000,000 should be entered as 10). Round your "Current ratio" to 1 decimal place. (0.9-32m capital Current ratico b. Evaluate the firm's iquidity at each balance sheet date. Based on the working capital and cunent rato measures, the fem has become more liquid ower the 2-year period Based on the working capital and curnent rato measures, the fem has become less liquid over the 2 year penod. c. Assume that the fim operated st a loss during the year ended January 31, 2017. How could cash have increased during the year? Changes in a fm's cash position andins srofiabilty are rot drectly related under acconual basis of accounting
Explanation / Answer
2017 2016 1 Current assets 42 44 Current liabilities 30 20 Working capital = Current assets - current liabilities Working capital 12 24 2 Current ratio = Current assets / current liabilities Current ratio 1.4 2.2 b the firm has become less liquid as working capital and current ratio is decreasing Correct answer is b c Cash position and accrual basis of accounting are not directly related So correct answer is A