Orange Ltd., a publicly traded company, has compiled their comparative Statement of Financial Position as follows for their December 31, 20X8 year-end.

Orange Ltd Comparative Statement of Financial Position As at December 31, 20X8

	20X8		20X7
Assets
Current Assets
Cash	42,485		22,000
Accounts receivable	163,794		181,000
Inventory	23,000	229,297	53,000	256,000
Non-current assets
PP&E (net)	759,600		446,000
Patents	80,000	839,600	87,000	295,000
Total Assets		1,068,897		507,000
Liabilities and Equity
Current liabilities
Accounts payable	47,532		31,700
Income tax payable	86,000	133,532	73,200	104,900
Non-current liabilities
Bank loan		698,000		275,000
Total liabilities		831,532		379,900
Equity
Common shares	78,000		78,000
Retained earnings	159,365	237,365	49,100	270,000
Total equity
Total Liabilities and Equity		1,068,897		507,000

Additional information:

Net income in 20X8 was $146,400: Sales were 1,552,000; Cost of sales 852,000; Operating expenses of 310,000; interest expense of 14,000; and income tax expense of 238,000.

PP&E is presented net of accumulated depreciation of $45,000 in 20X8 and $37,000 in 20X7. There have been no disposals of PPE during the year.

Patents are presented net of accumulated amortization of $29,000 in 20X8 and $22,000 in 20X7. There have been no disposals of intangible assets during the year.

Required:

(a) Prepare the operating section of Oranges Statement of Cash Flows for 20X8 using the direct method. (8 marks)

Orange Ltd Statement of Cash Flows For the year ended December 31, 20X8

Operating activities
Cash from customers ( )
Cash paid to suppliers ( )
Cash paid for other operating expenses ( )
Cash paid for interest
Cash paid for taxes ( )
Cash provided by (used in) operating activities

	20X8	20X7
Liquidity: current ratio	?	?
Solvency: debt to total assets	?	?
Leverage: debt to equity	?	?

(b) Write a 4-5 sentence memo to the shareholders of Orange Ltd discussing changes in the companys liquidity, solvency, and leverage year-over-year. (3 marks)