The following selected information (in thousands) was taken from Fruition Collections Ltd.'s December 31 statement of financial

Question:

The following selected information (in thousands) was taken from Fruition Collections Ltd.'s December 31 statement of financial position:

Instructions
(a) Calculate the current ratio for each of the two years. (1) Based only on this information, would you say that the company's liquidity is strong or weak? (2) What additional information should you request to complete your assessment of liquidity?
(b) Suppose that Fruition Collections used $1 million of its cash to pay off $1 million of its accounts payable. Would this transaction change the current ratio?
(c) At December 31, 2015, Fruition Collections had an unused operating line of credit of $4 million. Does this information affect the assessment of the company's short-term liquidity that you made in part (a) above?

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...