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Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in millions): Current Assets Cash Accounts receivable Inventories Total current assets Current Liabilities Note payable Accounts payable Other accrued liabilities Total current liabilities January January 31, 2020 31, 2019 Working capital Current ratio $9 6 6 $ 21 $ $ 15 $6 9 01/31/2020 01/31/2019 10 $ 25 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (Le... 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) 4 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. O 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, 2020. 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 cash position and its profitability are not directly related under cash basis of accounting.

Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in millions): Current Assets Cash Accounts receivable Inventories Total current assets Current Liabilities Note payable Accounts payable Other accrued liabilities Total current liabilities January January 31, 2020 31, 2019 Working capital Current ratio $9 6 6 $ 21 $ $ 15 $6 9 01/31/2020 01/31/2019 10 $ 25 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (Le... 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) 4 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. O 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, 2020. 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 cash position and its profitability are not directly related under cash basis of accounting.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 12P: Comprehensive Byrd Companys Contributed Capital section of its January 1, 2019, balance sheet is as...
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Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (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, 2020 Working capital Current ratio 6 EL EL $ 21 $ 15 January 31, 2019 01/31/2020 01/31/2019 9 18 $ 25 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (1.e.. 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) $12 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. O 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, 2020. 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 cash position and its profitability are not directly related under cash basis of accounting.
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): Current Assets Cash Accounts receivable Inventories Total current assets Current Liabilities Note payable Accounts payable Other accrued liabilities Total current liabilities January 31, 2020 Working capital Current ratio 6 EL EL $ 21 $ 15 January 31, 2019 01/31/2020 01/31/2019 9 18 $ 25 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (1.e.. 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) $12 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. O 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, 2020. 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 cash position and its profitability are not directly related under cash basis of accounting.
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