Do you think a firm should not have any liquidity or solvency questions if it is very profitable? The financial information of ABC Inc. and the industry average of certain financial ratios are presented below. Requirements: (1) Calculate the following financial ratios: Current ratio, Quick ratio, Accounts receivable turnover, Inventory turnover, Total assets turnover, Debt ratio, Times interest earned, Operating income, Return on assets, Return on equity, EPS, and Price-earnings ratio for each of the three years (ie, complete every cell containing an "A" in the attached Excel spreadsheet) (2) To assign qualitative assessments of Good, OK/Good, OK OK/Poor, or Poor to the trends in each of the firm's financial ratios as well as to the degree to which the firm's financial ratios are superior to the matching industry ratios ie, every cell containing a "8" in the attached Excel spreadsheet). (3) What is your overall evaluation of ABC's profitability, liquidity, asset management, and solvency? (4) What is the stock market's assessment of ABC's financial condition? Does the stock market's assessment confirm or refute your analysis? Note 1- Complete req (1) and (2) in the Excel spreadsheet and attach it to your initial post. Using cell-referenced equations to calculate ratios Your initial post should be your responses to req. (3) and (4). Note 2. For simplicity, all financial ratios requiring balance sheet data should be calculated using year-end figures rather than an average of beginning of year and end-of-year data Balance Sheet (in thousands) Dec. 31. Dec. 31, Dec. 31. 2017 2018 2019 Assets 5 IS s Cash & cash equivalents 1,512 1,176 1,097 Accounts receivable 6,237 10,271 15,919 Inventories 4,536 7.838 12,570 Prepaid expenses 3,780 5.140 6.840 Total current assets 16,065 24,425 36,426 Gross fixed assets 6,300 9,080 12,918 Less: Accumulated depreciation 2.050 2958 4.250 Net Fixed assets 4,250 6,122 8,668 Intangible assets 567 S88 605 All other noncurrent assets 12222 1.790 1985 Total assets 22.205 22.925 47.684 Liabilities and Stockholders' Equity Accounts payable 3,570 5,958 9,955 Notes payable 1,205 3,243 6,323 Current maturities-L.T.D. 1,008 1,460 2,246 Income taxes payable 84 336 336 Accruals and other current liabilities 1995 3.360 5.016 Total current liabilities 7,862 14,357 23,876 Long-term debt 2.940 6.100 2.350 Total liabilities 10,802 20.457 33,226 Stockholders' Equity Paid-in capital 3,360 3,360 3,360 Additional paid-in capital 2,100 2,100 2,100 Retained earning 5.943 20s 8.998 Total stockholders' equity 11403 12.468 14458 Total liabilities & stockholders' equity 22.205 22.925 47,684 Income Statement in thousands) 2017 $ 50.400 35431 14,969 2018 s 65,100 45,872 19,228 2019 5 81,312 57,098 24,214 12,331 630 Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses SGAA Depreciation expense Total operating expenses Operating income (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Income Taxes (34%) Net income 12,961 2,008 335 15,099 908 16,007 3,221 756 2.465 838 1.522 17,296 1.292 18 588 5,626 1343 4,283 1456 2,827 1,673 569 1.104 Selected Data from Cash Flow Statement in thousands) 2017 2018 2019 Net cash from operating activities Net cash from investment activities Net cash from financing activities $ (1,980) (2,975) 4,890 5 (2,156) (3.268) 5,088 5 (2.300) 14.050) 6,279 2017 2018 2019 Additional Data Number shares common stock outstanding in thousands Stock price per common share at the year end 1,120 1,120 1,120 $17.25 $17.71 $18.43 Financial Ratios 2017 2018 2019 Industry Average for 2019 Evaluation Time- series 2017-19 Cross- Sectional 2019 A A A 1.6 0.8 B B B 8 A 9.4 3.8 1.8 3 B B B A A B Liquidity Current ratio (times) Quick or Acid-test ratio (times) Asset Management Accounts receivable turnover (times) Inventory turnover (times) Total assets turnover Solvency Debt ratio (M) Times interest earned (times) Profitability Operating income Return on assets beforeta Return on equity before tas] Earnings per common share (EPS) Market analysis ratio Price earnings ratio (times) A A B 60N 3.4 B B B A A A A B B B A A 5 79 18% 51 20 A B A A 10 B Do you think a firm should not have any liquidity or solvency questions if it is very profitable? The financial information of ABC Inc. and the industry average of certain financial ratios are presented below. Requirements: (1) Calculate the following financial ratios: Current ratio, Quick ratio, Accounts receivable turnover, Inventory turnover, Total assets turnover, Debt ratio, Times interest earned, Operating income, Return on assets, Return on equity, EPS, and Price-earnings ratio for each of the three years (ie, complete every cell containing an "A" in the attached Excel spreadsheet) (2) To assign qualitative assessments of Good, OK/Good, OK OK/Poor, or Poor to the trends in each of the firm's financial ratios as well as to the degree to which the firm's financial ratios are superior to the matching industry ratios ie, every cell containing a "8" in the attached Excel spreadsheet). (3) What is your overall evaluation of ABC's profitability, liquidity, asset management, and solvency? (4) What is the stock market's assessment of ABC's financial condition? Does the stock market's assessment confirm or refute your analysis? Note 1- Complete req (1) and (2) in the Excel spreadsheet and attach it to your initial post. Using cell-referenced equations to calculate ratios Your initial post should be your responses to req. (3) and (4). Note 2. For simplicity, all financial ratios requiring balance sheet data should be calculated using year-end figures rather than an average of beginning of year and end-of-year data Balance Sheet (in thousands) Dec. 31. Dec. 31, Dec. 31. 2017 2018 2019 Assets 5 IS s Cash & cash equivalents 1,512 1,176 1,097 Accounts receivable 6,237 10,271 15,919 Inventories 4,536 7.838 12,570 Prepaid expenses 3,780 5.140 6.840 Total current assets 16,065 24,425 36,426 Gross fixed assets 6,300 9,080 12,918 Less: Accumulated depreciation 2.050 2958 4.250 Net Fixed assets 4,250 6,122 8,668 Intangible assets 567 S88 605 All other noncurrent assets 12222 1.790 1985 Total assets 22.205 22.925 47.684 Liabilities and Stockholders' Equity Accounts payable 3,570 5,958 9,955 Notes payable 1,205 3,243 6,323 Current maturities-L.T.D. 1,008 1,460 2,246 Income taxes payable 84 336 336 Accruals and other current liabilities 1995 3.360 5.016 Total current liabilities 7,862 14,357 23,876 Long-term debt 2.940 6.100 2.350 Total liabilities 10,802 20.457 33,226 Stockholders' Equity Paid-in capital 3,360 3,360 3,360 Additional paid-in capital 2,100 2,100 2,100 Retained earning 5.943 20s 8.998 Total stockholders' equity 11403 12.468 14458 Total liabilities & stockholders' equity 22.205 22.925 47,684 Income Statement in thousands) 2017 $ 50.400 35431 14,969 2018 s 65,100 45,872 19,228 2019 5 81,312 57,098 24,214 12,331 630 Sales revenue Less: Cost of goods sold Gross profit Less: Operating expenses SGAA Depreciation expense Total operating expenses Operating income (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Income Taxes (34%) Net income 12,961 2,008 335 15,099 908 16,007 3,221 756 2.465 838 1.522 17,296 1.292 18 588 5,626 1343 4,283 1456 2,827 1,673 569 1.104 Selected Data from Cash Flow Statement in thousands) 2017 2018 2019 Net cash from operating activities Net cash from investment activities Net cash from financing activities $ (1,980) (2,975) 4,890 5 (2,156) (3.268) 5,088 5 (2.300) 14.050) 6,279 2017 2018 2019 Additional Data Number shares common stock outstanding in thousands Stock price per common share at the year end 1,120 1,120 1,120 $17.25 $17.71 $18.43 Financial Ratios 2017 2018 2019 Industry Average for 2019 Evaluation Time- series 2017-19 Cross- Sectional 2019 A A A 1.6 0.8 B B B 8 A 9.4 3.8 1.8 3 B B B A A B Liquidity Current ratio (times) Quick or Acid-test ratio (times) Asset Management Accounts receivable turnover (times) Inventory turnover (times) Total assets turnover Solvency Debt ratio (M) Times interest earned (times) Profitability Operating income Return on assets beforeta Return on equity before tas] Earnings per common share (EPS) Market analysis ratio Price earnings ratio (times) A A B 60N 3.4 B B B A A A A B B B A A 5 79 18% 51 20 A B A A 10 B