At the end of 2019, Baby Ltd. faced increasing competition leading to a build up of inventory and declining profitability and liquidity. In an effort to generate more revenue and improve the company's financial position, the management team determined that the best course was to reduce prices and extend generous credit terms that would generate higher sales and cash flow. The results of the initiative are show in the following table:

Ratio	2019	2020	Industry
Profit Margin	9%	7%	12%
Gross Profit Margin	55%	50%	56%
Debt to Assets	68%	65%	73%
Times Interest Earned	6.5	3.7	4.3
Current Ratio	2.0	1.6	2.2
Accounts Receivable Turnover	8.1	5.3	6.2
Inventory Turnover	3.2	6.6	5.0
Free Cash Flow (thousands)*	$125	$98	$127

*Capital expenditures remained unchanged and no dividends were declared.

Using the above information to support your answer, complete the following analysis in your own words:

1. Discuss Baby's liquidity. (2 marks)
2. Discuss Baby's profitability. (2 marks)
3. Discuss Baby's solvency. (2 marks)
4. Conclude on the success of managements initiative and explain the reason for your conclusion. (2 marks)