Following are the current asset and current liability sections of the balance sh

Question

Following are the current asset and current liability sections of the balance sheets for Freedom, Inc., at January 31, 2011 and 2010 (in millions): January 31, 2011 January 31, 2010 Current Assets Cash $ 9 $ 6 Accounts receivable 7 10 Inventories 7 11 Total current assets $ 23 $ 27 Current Liabilities Note payable $ 5 $ 5 Accounts payable 5 2 Other accrued liabilities 2 2 Total current liabilities $12 $ 9 Calculate the working capital and current ratio at each balance sheet date. 1/31/11 1/31/10 Working capital $ $ Current ratio

Explanation / Answer

1/31/11 Working capital = 23 million – 12 million = $11 million Current ratio = 23 million/12 million = 1.92 1/31/10 Working capital = 27 million – 9 million = $18 million Current ratio = 27 million/9 million = 3

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