Consider the following balance sheets for Orchard Corporatio…
Consider the following balance sheets for Orchard Corporation (in millions).(a) Calculate the change in each balance sheet account from 2024 to 2025.(b) Identify whether each change represents a source or a use of cash.(c) What were the major sources and uses of cash during the year?(d) Did the firm become more or less liquid? Explain.ORCHARD CORPORATION — Balance Sheets (Assets)Item20242025Current assetsCash$205$185Accounts receivable440410Inventory710735Total current assets$1,355$1,330Fixed assetsNet fixed assets5,5205,940Total assets$6,875$7,270ORCHARD CORPORATION — Balance Sheets (Liabilities and Equity)Item20242025Current liabilitiesAccounts payable$275$315Notes payable1,030970Total current liabilities$1,305$1,285Long-term debt$1,840$2,020Shareholders’ equityCommon stock1,2001,200Retained earnings1,3101,699Total equity$2,510$2,899Total liabilities and equity$6,875$7,270
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Note: no need to enter your final answers for this questionBased on the Orchard Corporation income statement and balance sheets from the previous two problems, calculate the following ratios for 2025 using ending-of-year figures:Current ratioQuick ratioCash ratioInventory turnoverReceivables turnoverDays’ sales in inventoryDays’ sales in receivablesTotal debt ratioLong-term debt ratioTimes interest earned ratioCash coverage ratio(Data reminder from the previous two problems, in millions: Sales = $4,800; COGS =$3,240; Depreciation = $600; EBIT = $960; Interest = $240. Ending values: Cash = $185; Accounts receivable = $410; Inventory = $735; Total current assets = $1,330; Total current liabilities = $1,285; Long-term debt = $2,020; Total assets = $7,270; Total equity = $2,899.)
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