Atlas Limited operates a small wholesale private company selling imported foods to grocery retailers on Prince Edward Island. The company began operations on January 1, 2020, and has just completed its second year of operations. In January 2021, the company moved to a new location and now rents a much larger facility. When the move occurred, additional bank loans were taken out to finance the purchase of some new equipment. The CEO of the business,

Jim OSullivan, negotiated with the bank to have principal payments (not interest) on any bank loan delayed until 2020. Jim has asked you to review information from the companys financial statements shown below and to accompany him to the bank. He wants you to help him convince his banker to give the company an operating line of credit.

The banker has some misgivings. Jim is not sure why, because the current ratio has risen and the debt to total assets ratio has fallen slightly. He did tell you that a contingent liability relating to a lawsuit launched against the company will be disclosed in the financial statements, but it has not been recorded because an estimate could not be determined.

Shown below are amounts extracted from the financial statements (in thousands).

	2021	2020
Statement of Financial Position Information
Cash	$ 2,000	$10,000
Accounts receivable	20,000	5,000
Inventory	30,000	7,500
Property, plant, and equipment, net	60,000	50,000
Accounts payable	30,930	16,550
Bank loan, non-current	40,000	30,000
Common shares	13,000	13,000
Retained earnings	28,070	12,950
Statement of Income Information
Sales	$100,000	$50,000
Cost of goods sold	50,000	20,000
Operating expenses	26,000	10,000
Interest expense	2,400	1,500
Income tax expense	6,480	5,550

Reporting and Analyzing Liabilities

REQUIRED--

Part One: Preliminary calculations. Assume year-end amounts equal average amounts for the purpose of your calculations

(a) Current assets

(b) Average cash, average accounts receivable and average inventory

(Use year-end amounts for accounts receivable and inventory for 2020 and 2021)

(c) Total assets

(d) Current liabilities

(e) Total liabilities

(f) Income before taxes and interest

Part Two: Calculate liquidity and solvency ratios for 2020 and 2021.

(a) Current ratio

(b) Receivables turnover

(c) Inventory turnover

(d) Debt to total assets

(e) Times interest earned