Compute the current ratio as of january 2012

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Reference no: EM13529470

(Preparation of a Statement of Cash Flows, Analysis) The comparative balance sheets of Menachem Corporation at the beginning and end of the year 2012 appear below.

MENACHEM CORPORATION
  BALANCE SHEETS

Assets

Dec. 31, 2012

Jan. 1, 2012

Inc./Dec.

Cash

$22,000

$13,000

$ 9,000 Inc.

Accounts   receivable

106,000

88,000

18,000 Inc.

Equipment

37,000

22,000

15,000 Inc.

Less:   Accumulated depreciation-equipment

17,000

11,000

6,000 Inc.

Total

$148,000

$112,000

 

Liabilities   and Stockholders' Equity

     

Accounts   payable

$20,000

$15,000

5,000 Inc.

Common   stock

100,000

80,000

20,000 Inc.

Retained   earnings

28,000

17,000

11,000 Inc.

Total

$148,000

$112,000

 

Net income of $34,000 was reported, and dividends of $23,000 were paid in 2012. New equipment was purchased and none was sold.

Instructions

(a) Prepare a statement of cash flows for the year 2012.

(b) Compute the current ratio (current assets 4 current liabilities) as of January 1, 2012, and December 31, 2012, and compute free cash flow for the year 2012.

(c) In light of the analysis in (b), comment on Menachem's liquidity and financial flexibility.

Reference no: EM13529470

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