Question
Problem: Ratio Analysis (10 points) ABC Inc. (ABC) had the following events occur during the year. ABC follows IFRS and has been operating at
Problem: Ratio Analysis (10 points) ABC Inc. (ABC) had the following events occur during the year. ABC follows IFRS and has been operating at break even for several years. Several events from the current year are listed below: i) ii) iii) The costs of the drilling tool inventory (ABC's main product line) decreased due to obsolescence over the past year. ABC had a large impairment charge for one of their non-current assets in the current year. Because of equipment upgrade requirements, ABC obtained new equipment which led to higher depreciation expenses in the current year. Required: For all three events listed above, discuss the implications on the two ratios (with their definitions) listed below. Briefly describe how the ratio changes (if it even does) and why. a) Current Ratio b) current assets / current liabilities (5 marks) Return on assets = Net Income/Average total assets (5 marks) 1 Finis
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