TMC Ltd, a large producer of telecommunications equipment, retails its products through suburban outlets.

The calculations of some of its key ratios for 2021 and 2020 are shown.

2021 2020 Return on equity (ROE) 13% 12%

Return on total assets (ROA) 8% 9%

Profit margin 20% 18%

Asset turnover 0.40 times 0.50 times Days in inventory 72 days 55 days Days in debtors 42 days 42 days Current ratio 1.6 times 1.5 times Quick ratio 0.7 times 1.1 times Debt-to-equity ratio 1.4 times 1.0 times 1 Comment on TMC’s profitability, activity (turnover), liquidity/solvency and financial structure.

2 Why can ROE and ROA move in different directions?

3 What caused the fall in ROA?

4 What caused the fall in asset turnover?

5 What caused the increase in the current ratio?