Question

Analysis and Interpretation of Liquidity and Solvency Headquartered in Calgary, Alberta, Husky Energy Inc. is a publicly traded, integrated energy company. Selected fiscal year balance sheet and income statement information for Husky Energy follow (Canadian $ millions). C$ millions 2018 2017 Cash and equivalents $2,895 $2,538 Short-term investments - - Accounts receivable 1,369 1,369 Current assets 5,745 5,672 Current liabilities 4,994 3,507 Total liabilities 15,611 14,960 Total equity 19,810 18,147 Earnings before interest and tax (EBIT) 2,116 731 Interest expense, gross 314 392 Required a. Compute the current ratio and quick ratio for 2018 and 2017. Note: Round your answers to two decimal places (for example, enter 6.78 for 6.77555). 2018 2017 Current ratio Answer 0 Answer 0 Quick ratio Answer 0 Answer 0 b. Compute times interest earned and liabilities‑to‑equity ratios for 2018 and 2017. Note: Round your answers to two decimal places (for example, enter 6.78 for 6.77555). 2018 2017 Time interest earned Answer 0 Answer 0 Liabilities-to-equity Answer 0 Answer 0 c. Husky's liquidity is best described as Answer Husky's solvency is best described as Answer

Answer 1

Part 1 and 3

	2018	2017
Current assets	5,745	5,672
Divided by: Current liabilities	4,994	3,507
Current ratio	1.15	1.62
Current assets	5,745	5,672
Less: inventory and other current assets [prepaid expenses, if any]	-	-
Quick asset	5,745	5,672
Divided by: Current liabilities	4,994	3,507
Quick ratio	1.15	1.62

Part 3

Liquidity of the company is decreased as compared to last year of 2017. This is bad for the company.

Part 2 and 3

	2018	2017
Earnings before interest and tax [EBIT]	2,116	731
Divided by: Interest expense	314	392
Times interest earned	6.74	1.86
Total liabilities	15,611	14,960
Divided by: Total equity	19,810	18,147
Liabilities-to-equity	0.79	0.82

part 3

Solvency of the company is increased as compared to last year of 2017. This is good for the company.