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A company is a leading retailer specializing in consumer electronics. A condensed income statement and balance sheet for the fiscal year ended January 28 of the current year are shown below: A Company Balance Sheet January 28, Current Year ($ in millions) Assets   Current assets:   Cash and cash equivalents $ 2,116 Accounts receivable (net) 1,232 Inventory 5,065 Other current assets 420 Total current assets 8,833 Long-term assets 3,703 Total assets $ 12,536 Liabilities and Shareholders’ Equity   Current liabilities:   Accounts payable $ 5,150 Other current liabilities 3,875 Total current liabilities 9,025 Long-term liabilities 2,244 Shareholders’ equity 1,267 Total liabilities and shareholders’ equity $ 12,536 A Company Income Statement For the Year Ended January 28, Current Year ($ in millions) Revenues $ 39,598 Costs and expenses 38,167 Operating income 1,431 Other income (expense)* Footnote asterisk (79) Income before income taxes 1,352 Income tax expense 713 Net income $ 639 * Footnote asterisk Includes $206 of interest expense. Liquidity and solvency ratios for the industry are as follows:   Industry Average Current ratio 1.18   Acid-test ratio 0.74   Debt to equity 0.84   Times interest earned 7.11 times Required: 1-a. Calculate the current ratio for the company for its fiscal year ended January 28. 1-b. Calculate the acid-test ratio for the company for its fiscal year ended January 28. 1-c. Calculate the debt to equity ratio for the company for its fiscal year ended January 28. 1-d. Calculate the times interest earned ratio for the company for its fiscal year ended January 28. 2. Assess whether each ratio indicates higher or lower risk of A Company liquidity and solvency relative to its industry.

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The task presents liquidity and solvency metrics for A Company and asks to assess using the provided industry benchmarks. Since no multiple-choice options are given, I will walk through each ratio, how it is computed from the balance sheet and income statement, and how it compares to the industry averages. Current ratio calculation: This ratio measures short-term liquidity and is computed as Total current assets divided by Total current liabilities. From the balance sheet, Total current assets = 8,833 and Total current liabilities = 9,025. Therefore, Current ratio = 8,833 / 9,025 ≈ 0.98. Compared to the industry average of 1.18, A Company's current ratio is lower, whi......Login to view full explanation

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