The $2021$ financial statements of Honourable Minds Supply $($HMS$)$ Inc. are presented below. HMS conducted all investing and financing transactions in cash $($i$.$e$.,$ NO non$-$cash transactions$)$ during $2021.$ During the year, they did NOT sell land or equipment and they did NOT issue any new notes payable. The company did NOT repurchase any shares.

Review the provided information carefully: Data column $1$ provides info for $2021$; data column $2$ provides info for $2020,$ the third column provides the difference between the two years.

Honourable Minds Supply Inc.

Comparative Balance Sheet

As at December $31,2021$ and $2020$

Dec $31,2021$ Dec $31,2020$ Difference

Current assets

Cash and cash equivalents $14,6005,3009,300$

Accounts receivable $23,20023,600(400)$

Inventories $63,60066,200(2,600)$

Prepaid expenses $3,5002,900600$

Total current assets $104,90098,0006,900$

Non$-$current assets

Land $99,00072,00027,000$

Equipment, net $56,50052,4004,100$

Total non$-$current assets $155,500124,40031,100$

Total assets $260,400222,40038,000$

Current liabilities

Accounts payable $32,60029,7002,900$

Salary payable $4,2007,600(3,400)$

Other accrued liabilities $21,50022,600(1,100)$

Total current liabilities $58,30059,900(1,600)$

Non$-$current liabilities

Notes payable $($long$-$term$)83,000100,000(17,000)$

Total liabilities $141,300159,900(18,600)$

Shareholders' equity

Common shares $85,00060,00025,000$

Retained earnings $34,1002,50031,600$

Total shareholders' equity $125,14068,60056,540$

Total liabilities and shareholders' equity $266,440228,50037,940$

Honourable Minds Supply Inc.

Income Statement

For the Year Ended December $31,2021$

Sales revenues $328,700$

Cost of goods sold $168,800$

Gross profit $159,900$

Salary expense $35,800$

Depreciation expense $7,000$

Other operating expense $20,50063,300$

Operating income $96,600$

Interest expense $10,600$

Earnings before tax $86,000$

Income tax expense $25,100$

Net income $60,900$

Requirement $1$: Prepare the $2021$ statement of cash flows from operating activities using the indirect method. Use table $1$ below for your response.

Requirement $2$: Calculate the current ratio for both years and enter the correct answer in the provided table $2$ below. Round to two decimals. Indicate whether liquidity $($based on this ratio$)$ has improved or deteriorated over time.