CL Marshall Liquors owns and operates a chain of beer and wine shops throughout the Dallas$$Fort Worth metroplex. As a result of the rapidly expanding population of the area, the firm requires a growing amount of funds. Historically, it has reinvested earnings and borrowed using short$-$term bank notes. Bal$-$ ance sheets, in thousands, for the last five years are as follows:

$2012$

$2013$

$2014$

$2015$

$2016$

Current assets

$$100$

$$130$

$$160$

$$190$

$$220$

Fixed assets

$250$

$270$

$290$

$310$

$330$

Total Assets

$$350$

$$400$

$$450$

$$500$

$$550$

Current liabilities

$$50$

$$90$

$$130$

$$170$

$$210$

Long$-$term liabilities

$100$

$100$

$100$

$100$

$100$

Owners$$ equity

$200$

$210$

$220$

$230$

$240$

Total liabilities and owners$$ equity

$$350$

$$400$

$$450$

$$500$

$$550$

a$.$ Compute the firm$$s current ratio $($current assets divided by current liabilities$)$ and debt ratio $($current plus long$-$term liabilities divided by total assets$)$ for the five$-$ year period found above. Describe the firm$$s risk using both the current ratio and the debt ratio.

b$.$ Alter the financial statements above so that current liabilities remain constant at $$50$ and long$-$term liabilities increase in the amount needed to meet the firm$$s financing requirements. Compute the firm$$s current ratio $($current assets divided by current li$-$ abilities$)$ and debt ratio $($current plus long$-$term liabilities divided by total assets$)$ us$-$ ing the revised financial statements you have prepared for the five$-$year period above. Describe the firm$$s risk using both the current ratio and the debt ratio.

c$.$ Which of the financing plans is more risky? Why?