You have taken the following information from a firm’s financial statements. As an investor in the firm’s debt instruments, you are concerned with its liquidity position and its use of financial leverage. What conclusions can you draw from this information?

20X2 20X1 20X0 Sales $1,700,000 $1,500,000 $1,000,000 Cash 18,000 7,000 5,000 Accounts receivable 152,000 130,000 125,000 Inventory 200,000 190,000 200,000 Current liabilities 225,000 210,000 175,000 Operating income 170,000 145,000 90,000 Interest expense 27,000 23,000 20,000 Taxes 53,000 45,000 25,000 Net income 90,000 77,000 45,000 Debt 260,000 250,000 200,000 Equity 330,000 300,000 200,000