Question
The comparative balance sheets of Sage Corporation at the beginning and end of the year 2020 appear below. SAGE CORPORATION BALANCE SHEETS Dec. 31, 2020
The comparative balance sheets of Sage Corporation at the beginning and end of the year 2020 appear below.
SAGE CORPORATION BALANCE SHEETS | |||||||||||
Dec. 31, 2020 | Jan. 1, 2020 | Inc./Dec. | |||||||||
Assets | |||||||||||
Cash | $21,880 | $15,320 | $6,560 | Inc. | |||||||
Accounts receivable | 107,880 | 90,320 | 17,560 | Inc. | |||||||
Equipment | 40,880 | 24,320 | 16,560 | Inc. | |||||||
Less: Accumulated Depreciation-Equipment | (17,000 | ) | (11,000 | ) | 6,000 | Inc. | |||||
Total | $153,640 | $118,960 | |||||||||
Liabilities and Stockholders Equity | |||||||||||
Accounts payable | $21,880 | $17,320 | 4,560 | Inc. | |||||||
Common stock | 101,880 | 82,320 | 19,560 | Inc. | |||||||
Retained earnings | 29,880 | 19,320 | 10,560 | Inc. | |||||||
Total | $153,640 | $118,960 |
Net income of $45,880 was reported, and dividends of $35,320 were paid in 2020. New equipment was purchased and none was sold.
Compute the current ratio (current assets current liabilities) as of January 1, 2020, and December 31, 2020. (Round ratios to 1 decimal place., e.g. 4.5.)
December 31, 2020 | January 1, 2020 | |||
Current ratio |
Compute free cash flow for the year 2020. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Free Cash Flow | $ |
In light of the analysis in (part b), comment on Sages liquidity and financial flexibility.
Sage company has (bad/good) liquidity and(bad/good) financial flexibility. |
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