Calculate (and document) suitable ratios with respect to of a) liquidity, b) solvency, c) profitability and d) efficiency

BRIEFLY (maximum of 400 words) use these ratios to respond to the following 3 questions. Long rambling answers will not be graded - if you understand the ratios, you can be precise in answering.

1. If this company approached you to buy your product on your normal 30-day trade credit terms, would you extend them trade credit. Justify your agreement to sell to them or not to sell to them using financial ratios
2. If this firm approached you to lend them long term funds, would you advance funds to them. Why or why not.
3. Explain and quantify why the percentage return on equity to shareholders is significantly higher than the percentage of operating return on assets used.

Data Set

CUSABA INCORPORATED - BALANCE SHEET AS AT DECEMBER 31, 2019

ASSETSLIABILITIES AND EQUITYCash$27,000Accounts Payable$112,500Marketable Securities7,500Bank Loan262,500Accounts Receivable675,000Accrued Expenses4,500Inventory487,500Interest Payable1,500Prepaid Expenses10,500Long Term Bonds Payable255,000Property Plant and Equipment247,500Common Stock264,000Goodwill45,000Retained Earnings600,000Total Assets$1,500,000Total Liabilities and Equity$1,500,000

CUSABA INCORPORATED - INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019Sales (all on credit)$2,700,000Cost of goods sold1,800,000Gross profit900,000Selling and admirative expense375,000Depreciation30,000Operating Income495,000Interest Expense46,500Earnings before taxes448,500Income Taxes112,500Net Income$336,000Calculate (and document) suitable ratios with respect to of a) liquidity, b) solvency, c) profitability and d) efficiency

BRIEFLY use these ratios to respond to the following 3 questions. Long rambling answers will not be graded - if you understand the ratios, you can be precise in answering.

If this company approached you to buy your product on your normal 30-day trade credit terms, would you extend them trade credit. Justify your agreement to sell to them or not to sell to them using financial ratios

If this firm approached you to lend them long term funds, would you advance funds to them. Why or why not.

Explain and quantify why the percentage return on equity to shareholders is significantly higher than the percentage of operating return on assets used.

Data Set

CUSABA INCORPORATED - BALANCE SHEET AS AT DECEMBER 31, 2019

ASSETS LIABILITIES AND EQUITY

Cash $27,000 Accounts Payable $112,500

Marketable Securities 7,500 Bank Loan 262,500

Accounts Receivable 675,000 Accrued Expenses 4,500

Inventory 487,500 Interest Payable 1,500

Prepaid Expenses 10,500 Long Term Bonds Payable 255,000

Property Plant and Equipment 247,500 Common Stock 264,000

Goodwill 45,000 Retained Earnings 600,000

Total Assets $1,500,000 Total Liabilities and Equity $1,500,000

CUSABA INCORPORATED - INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019

Sales (all on credit) $2,700,000

Cost of goods sold 1,800,000

Gross profit 900,000

Selling and admirative expense 375,000

Depreciation 30,000

Operating Income 495,000

Interest Expense 46,500

Earnings before taxes 448,500

Income Taxes 112,500

Net Income $336,000