(Ratio analysis over time) The following information comes from the accounting records of Hercep Ltd. for the first three years of its existence: 2018 2019 2020 Statement of Financial Position Assets Cash $23,400 $19,800 $27,200 Accounts receivable 67,200 58,000 144,500 Inventory 114,000 145,000 236,000 Capital assets (net) 433,000 451,000 512,000 Other assets 235,000 212,000 267,600 $872,600 $885,800 $1,187,300 Liabilities and equity Accounts payable $109,000 $54,500 $109,000 Long-term debt 206,000 256,000 512,000 Common shares 523,000 523,000 523,000 Retained earnings 34,600 52,300 43,300 $872,600 $885,800 $1,187,300 Statement of Earnings Sales $600,000 $840,000 $925,000 Cost of goods sold (336,000) (571,200) (693,750) Other expenses (166,000) (225,000) (223,000) 98,000 43,800 8,250 Income tax (29,400) (13,140) (2,475) Net income $68,600 $30,660 $5,775 (21) Your answer is correct. Based on above information, analyze the changes in the company's profitability and liquidity, in addition to the management of accounts receivable and inventory from 2018 to 2020. (Round answers to 1 decimal place, e.g. 13.5% or 13.5.) 2018 2019 2020 Sales 100.0 % 100.0 % Cost of goods sold 56.0 i % 68.0 i % 75 Gross margin 44.0 i % 32.0 i % 25 Other expenses 27.7 i % 26.8 i % 24 Income taxes 4.9 % 1.6 i % 0 Net income 11.4 % 3.7 % 2018 2019 Current Ratio 1.9 :1 4.1 :1 Quick Ratio 0.9 :1 1.4 :1 ITION A/R Turnover 8.9 times 13.4 times Average Collection Period 41.0 days 27.2 days Inventory Turnover 2.9 times 4.4 times Days to Sell Inventory 125.9 days 83.0 days e Textbook and Media Assistance Used (51) Your answer is partially correct. Based on the above information, analyze the company's use of leverage from 2018 to 2020. (Round answers to 1 decimal place, e.g. 15.1%.) 2018 2019 2020 Debt to Equity 56.5 % 54.4 % 82.2 % Return on Assets 7.9 % 3 3.5 % 0.6 % Return on Equity 12.3 % 5 5.4 % 1.0 % eTextbook and Media Assistance Used e Textbook