Question

Tamarisk Inc., a fertilizer company based in Saskatchewan, had the following information in its financial statements...

Tamarisk Inc., a fertilizer company based in Saskatchewan, had the following information in its financial statements for the fiscal years ended December 31. All figures are in millions of Canadian dollars.

2021 2020 2019
Cash and cash equivalents $390 $1,560 $110
Accounts receivable 1,230 820 600
Current assets 5,010 3,690 1,560
Current liabilities 2,700 1,315 990

Calculate Tamarisk's (1) working capital, (2) current ratio, and (3) acid-test ratio for each year. (Enter working capital amounts in millions. Round ratio answers to 2 decimal places, e.g. 1.75:1.)

2021 2020 2019
Working Capital $ $ $
Current Ratio : 1 : 1 : 1
Acid-test Ratio : 1 : 1 : 1

  

  

Determine from the results obtained in part (a) if Tamarisk's:

(1) Working capital                                                                       improveddeteriorated from 2020 to 2021.
(2) Current ratio                                                                       improveddeteriorated from 2020 to 2021.
(3) Current ratio                                                                       improveddeteriorated from 2019 to 2020.
(4) Acid-test ratio                                                                       deterioratedimproved from 2020 to 2021.
(5) Acid-test ratio                                                                       deterioratedimproved from 2019 to 2020.

  

  

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Answer #1
Working capital 2021 2020 2019
Current assets 5010 3690 1560
Less: Current liabilities 2700 1315 990
Working capital 2310 2375 570
Current ratio 2021 2020 2019
Current assets 5010 3690 1560
Divide: Current liabilities 2700 1315 990
Current ratio 1.86 2.81 1.58
acid test ratio 2021 2020 2019
Cash and cash equivalent 390 1560 110
Add: Accounts receivable 1230 820 600
Total Quick assets 1,620 2,380 710
Divide: Current liabilities 2700 1315 990
acid test ratio 0.6 1.81 0.72
1. Working capital Deteriorated from 2020 to 2021
2. Current ratio Deteriorated from 2020 to 2021
3. Current ratio Improved from 2019 to 2020
4. Acid test ratio Deteriorated from 2020 to 2021
5. Acid test ratio Improved from 2019 to 2020
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