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The 2021 financial statements of Honourable Minds Supply (HMS) Inc. are presented below. HMS conducted all investing and financing transactions in cash (ie no non

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The 2021 financial statements of Honourable Minds Supply (HMS) Inc. are presented below. HMS conducted all investing and financing transactions in cash (ie 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. Honourable Minds Supply Inc. Comparative Balance Sheet As at December 31, 2021 and 2020 Dec 31, 2021 Dec 31, 2020 Difference 9,300 400 Current assets Cash and cash equivalents Accounts receivable Inventories Prepaid expenses Total current assets Non-current assets Land Equipment, net Total non-current assets Total assets 14,600 23,200 63,600 3,500 104,900 5,300 23,600 66,200 2,900 98,000 -2.600 600 6,900 99,000 56,500 72,000 52,400 124,400 222.400 27,000 4.100 31.100 38,000 155,500 260,400 Current liabilities Accounts payable Salary payable Other accrued liabilities Total current liabilities Non-current liabilities Notes payable Total liabilities 31,600 4,200 21,500 58,300 29,700 7,600 22,600 59,900 2,900 -3.400 1,100 -1,600 83,000 141.300 100,000 152,900 - 17.000 -18,600 Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity. 85,000 34.100 125,140 60,000 2,500 68,600 20,000 36,540 56,540 266,440 228,500 37.940 Honourable Minds Supply inc Income Statement For the Year Ended December 31, 2021 Sales revenues Cost of goods sold Gross profit Salary expense Depreciation expense Other operating expense Operating income Interest expense Earnings before tax Income tax expense Net income 328,700 168,800 159 900 38,800 7,000 20,500 63.300 96,600 10,600 86,000 25,100 60,900 Req. 1: Prepare the 2021 statement of cash flows from operating activities using the indirect method. Use table 1 below to present the statement. Req. 2: Calculate the current ratio for both years and enter the correct answer in the provided table 2 below. Indicate whether liquidity (based on this ratio) has improved or deteriorated over time. Req. 3: Which other ratio would you investigate next? Explain your rationale (2-3 sentences). Use table 3 below to enter your response

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