IGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution and sale of a variety of food products. Industry averages are derived from Troy?s The Almanac of Business and Industrial Financial Ratios. Following are the 2021 and 2020 comparative balance sheets for IGF. (The financial data we use are from actual financial statements of a well-known corporation, but the company name used is fictitious and the numbers and dates have been modified slightly.)

Liquidity refers to a company?s cash position and overall ability to obtain cash in the normal course of business. A company is said to be liquid if it has sufficient cash or is capable of converting its other assets to cash in a relatively short period of time so that currently maturing debts can be paid.

Required:1. Calculate the current ratio for IGF for 2021. The average ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 1.5. What information does your calculation provide an investor?2. Calculate IGF?s acid-test or quick ratio for 2021. The ratio for the stocks listed on the New York Stock Exchange in a comparable time period was .80. What does your calculation indicate about IGF?s liquidity?

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IGF FOODS COMPANY Comparative Balance Sheets Years Ended December 31, 2021 and 2020 ($ in millions) 2021 2020 Assets Current assets: $ 142 48 Cash Accounts receivable 347 320 Marketable securities 358 Inventories 914 874 Prepaid expenses 212 154 1,879 2,592 Total current assets 1,490 2,291 Property, plant, and equipment (net) Intangibles (net) 800 843 Other assets 74 60 $5,345 $4,684 Total assets Liabilities and Shareholders' Equity Current liabilities: $ 254 $ 276 Accounts payable 496 Accrued liabilities 493 115 Notes payable Current portion of long-term debt 518 54 208 Total current liabilities 1,473 941 Long-term debt 534 728 407 344 Deferred income taxes 2,414 Total liabilities 2,013 Shareholders' equity: Common stock 180 180 Additional paid-in capital Retained earnings 21 63 2,730 2,428 Total shareholders' equity 2,931 2,671 Total liabilities and shareholders' equity $5,345 $4,684