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How many marks that the answer can get? (A) Explain what each of the six ratios means. (1 mark each x 6 ratios = 6
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(A) Explain what each of the six ratios means. (1 mark each x 6 ratios = 6 marks) Maximum of 20 words (100 characters) per explanation. (B) Discuss the liquidity, solvency and profitability of Your Company. (6 marks) Maximum of 100 words (500 characters) Your Company Pty Ltd 2020 2019 2018 (0) Debt Ratio = Total Liabilities/Total Assets 2.5 2.3 2.1 (ii) Earnings per share = Profit/Number of shares issued 0.01 1 1.26 (ii) Inventory Turnover = Cost of Goods Sold/Average Inventory 4.9 times 5.1 times 5.4 times (iv) Times interest earned ratio = (Profit before tax + Interest Expense) / Interest Expense 1.8 times 16.2 times 33.6 times (V) Rate of return on ordinary shareholders' equity= Profit/Average shareholdes' equity 0.3 31.6% 53.6% (vi) Current Ratio - Current Assets/Current Liabilities 1.2 1.5 2.0 Industry average 2.0 1 5.3 times 12 times 10.04 1.1 Answer A (0) Debt Ratio This shows us the abililty that a company can pay off their liability Answer A (ii) Earnings per this means that how much profit that per shares issued can get share Answer A (iii) Inventory this means that how many times that cost of goods is greater than per inventory tumover Answer A (iv) Times interest this means the times interested earned earned Answer A (v) Return on s/h this means that how much profit that per shareholds' equity can get equity Answer A (vi) Current ratio this shows us the ability of a company that can meet short term liabilities ANSWER B Discuss liquidity, solvency, profitability Liqidity shows us the ability that can pay off our liability, in the 2020,we have the highest debt ratio, this means that we will fail to meet our liability. Solvency can tell us about our ability to meet short-term liability, as the table shown above, in 2020, we have the lowest current ratio, that means we have problems to develop our business. profitability means a ratio that how much profit we can get when we have expense and costStep by Step Solution
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