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The cash flow statement highlights some important aspects of Computron's financial condition. First, note that the firm's net operating cash flow is -$73,780, so its

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The cash flow statement highlights some important aspects of Computron's financial condition. First, note that the firm's net operating cash flow is -$73,780, so its operations are draining cash despite the positive net income reported on the income statement. Second, because of its negative cash flow from operations, Computron had to borrow a total of $126,180 in long- and short-term debt to cover its operating cash outlays, to pay for fixed asset additions, and to pay dividends. Even after all this borrowing. Computron's cash account still fell by $5,600 during 2014, C. Computron has $540,200 in obligations that must be satisfied within the coming year. Will it have trouble meeting its required payments? A full liquidity analysis requires a cash budget, but these two ratios provide quick, easy-to-use measures of liquidity: Current assets $1,290,000 Current ratio= =2.39% Current liabilities $540,200 Quick ratio= Current assets - Inventories_$1,290,000-$836,000 -0.84x Current liabilities $540,200 2015 2014 Industry Current ratio 2.4x 2.3x 2.7x Quick ratio 0.8x 0.8x 1.0x Computron's current and quick ratios have both held steady from 2014 to 2015, but they are slightly below the industry average. With a 2014 current ratio of 2.4, Computron could liquidate assets at only 1/2.4 = 0.42 = 42% of book value and still pay off current creditors in full. In general, inventories are the least liquid of a firm's current assets, and they are the assets on which losses are most likely to occur in the event of a forced sale. Computco's quick ratio of 0.8 indicates that even if receivables can be collected in full, the firm would still need to raise some cash from the sale of inventories to meet its current claims. The cash flow statement highlights some important aspects of Computron's financial condition. First, note that the firm's net operating cash flow is -$73,780, so its operations are draining cash despite the positive net income reported on the income statement. Second, because of its negative cash flow from operations, Computron had to borrow a total of $126,180 in long- and short-term debt to cover its operating cash outlays, to pay for fixed asset additions, and to pay dividends. Even after all this borrowing. Computron's cash account still fell by $5,600 during 2014, C. Computron has $540,200 in obligations that must be satisfied within the coming year. Will it have trouble meeting its required payments? A full liquidity analysis requires a cash budget, but these two ratios provide quick, easy-to-use measures of liquidity: Current assets $1,290,000 Current ratio= =2.39% Current liabilities $540,200 Quick ratio= Current assets - Inventories_$1,290,000-$836,000 -0.84x Current liabilities $540,200 2015 2014 Industry Current ratio 2.4x 2.3x 2.7x Quick ratio 0.8x 0.8x 1.0x Computron's current and quick ratios have both held steady from 2014 to 2015, but they are slightly below the industry average. With a 2014 current ratio of 2.4, Computron could liquidate assets at only 1/2.4 = 0.42 = 42% of book value and still pay off current creditors in full. In general, inventories are the least liquid of a firm's current assets, and they are the assets on which losses are most likely to occur in the event of a forced sale. Computco's quick ratio of 0.8 indicates that even if receivables can be collected in full, the firm would still need to raise some cash from the sale of inventories to meet its current claims

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