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QUESTION 5 Given below are the liquidity and profitability ratios of ABC Ltd for the financial years 2016 - 2018 and the comparable industry average.
QUESTION 5 Given below are the liquidity and profitability ratios of ABC Ltd for the financial years 2016 - 2018 and the comparable industry average. 2016 2017 2018 Industry Current asset ratio 1.5: 1 1.7: 1 2. 1:1 2.2:1 Quick (acid test) 0.8: 1 0.6: 1 0.45:1 61 70 83 Inventory turnover period (days) Accounts receivable turnover period (days) 35 32 28 REQUIRED: a. Critically evaluate the liquidity position of ABC Ltd. QUESTION 6 You are reviewing the performance of a company that has posted in its most recent yearend financial statements a rate of return of 10%. REQUIRED: Discuss additional information and bench marks that might assist you in evaluating whether this return is adequate. A single ratio by itself may not be very meaningful and is best interpreted by comparison with: (1) past ratios of the same entity, (2) ratios of other entities, or (3) industry norms or predetermined standards. In addition, other ratios of the entity such as efficiency, liquidity and gearing ratios are necessary to determine overall financial well-being
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