Question 2 (Ratio Analysis/ 25 marks) Selected year-end financial statements of Healthy Life Limited are as follows: Healthy Life Limited Comparative Statements of Financial Position As at December 31, 2019 and 2018 2019 2018 Assets Cash Short-term investment Accounts receivable (net) Notes receivable (due in 3 months) Inventory Prepaid rent Property, plant and equipment (net) Total Assets $ 120,000 100,800 350,400 54,000 385,800 31,800 1,839,600 $2,882,400 $108,000 54,000 78,000 30,000 586,800 24,000 1,686,000 $2,566,800 $345,024 78,000 30,000 Liabilities and Equity Accounts payable Wages payable Income taxes payable Long-term loans (due in 5 years) Share capital Retained earnings Total Liabilities and Equity $ 210,000 38,400 39,600 760,800 1,080,000 753,600 $2,882,400 760,800 1,080,000 272,976 $2.566,800 Healthy Life Limited Income Statement For the year ended December 31, 2019 Net sales (all on credit) Cost of goods sold Gross profit Selling expenses Administrative expenses Finance costs - interest expenses Income before income taxes Income taxes (@ 40%) Net income $5,383,200 (3,400,070) (?,???,???) (120,000) (962,200) (49,900) (???,???) (???,???) $ ??,??? Required: (a) Calculate the following ratios for Healthy Life Limited: i) Current ratio for 2019 and 2018 (3 marks) ii) Acid-test ratio for 2019 and 2018 (3 marks) iii) Debt ratio for 2019 and 2018 (3 marks) iv) Which ratio(s) has/have improved? (1 mark) (Please provide formulae and all ratios should be expressed in one decimal place.) (10 marks) (b) Calculate the following ratios for Healthy Life Limited for 2019: i) Accounts receivable collection period (2 marks each) ii) Inventory holding period iii) Gross profit margin iv) Profit margin v) Return on equity (Please provide formulae and all ratios should be expressed in one decimal place.) (10 marks) (c) Discuss the implications of gross profit margin and profit margin, and the relationship between these two margins