Compute and Interpret Liquidity and Solvency Ratios

Selected balance sheet and income statement information from Gopher QH $($the Company$),$ for $2018$ through $2020$ follows $($ millions$).$

Total Total Cash

Current Current Flow from Pretax Interest Total Stockholders$$

Assets Liabilities Operations Income Expense Liabilities Equity

$2018516,560311,08649,34047,1448,712726,952400,690$

$2019562,960329,59949,52140,6027,720794,120425,193$

$2020423,744221,69351,89933,2176,520672,592332,113$

a$.$ Compute the current ratio for each year and discuss any trend in liquidity. Also compute the operating cash $$ow to current liabilities $($OCFCL$)$ ratio for each year. $($In $2017,$ current liabilities totaled $299,409$ million.$)$ Do you believe the company is su$$ciently liquid? Explain.

$$ Note: Round your answers to the nearest million euros.

Numerator $($ millions$)$ Denominator $($ millions$)$ Result

$2018$ Current ratio Answer $1$

$516,560$

$-$: Answer $2$

$311,086$

$=$

$1\mathrm{.}66$

$2019$ Current ratio Answer $3$

$562,960$

$-$: Answer $4$

$329,599$

$=$

$1\mathrm{.}71$

$2020$ Current ratio Answer $5$

$423,744$

$-$: Answer $6$

$221,693$

$=$

$1\mathrm{.}91$

$2018$ OCFCL Answer $7$

$49,340$

$-$: Answer $8$

$0$

$=$

$2019$ OCFCL Answer $9$

$49,521$

$-$: Answer $10$

$0$

$=$

$2020$ OCFCL Answer $11$

$51,899$

$-$: Answer $12$

$0$

$=$

The Company has a $2020$ current ratio of Answer $13$

$1\mathrm{.}91$

$,$ suggesting Answer $14$

Sufficient liquidity

$.$

and a $2020$ OCFCL ratio of Answer $15$

$0$

$,$ suggesting Answer $16$

Insufficient liquidity

$.$

b$.$ Compute times interest earned and the debt$-$to$-$equity ratio for each year and discuss any trends for each.

$$ Note: Round your answers to the nearest million euros.

Numerator $($ millions$)$ Denominator $($ millions$)$ Result

$2018$ Times$-$interest$-$earned ratio Answer $17$

$0$

$-$: Answer $18$

$8,712$

$=$

$0$

$2019$ Times$-$interest$-$earned ratio Answer $19$

$0$

$-$: Answer $20$

$7,720$

$=$

$0$

$2020$ Times$-$interest$-$earned ratio Answer $21$

$0$

$-$: Answer $22$

$6,520$

$=$

$0$

$2018$ Debt$-$to$-$equity ratio Answer $23$

$726,952$

$-$: Answer $24$

$400,690$

$=$

$1\mathrm{.}81$

$2019$ Debt$-$to$-$equity ratio Answer $25$

$794,120$

$-$: Answer $26$

$425,193$

$=$

$1\mathrm{.}87$

$2020$ Debt$-$to$-$equity ratio Answer $27$

$672,592$

$-$: Answer $28$

$332,113$

$=$

$2\mathrm{.}03$