Required:

a) Compute the following ratios for Bel Air for 2018 (2 marks):

i. Return on ordinary shareholders equity,

ii. Quick ratio

iii. Debt to total assets

iv. Returns on asset

b) Independent of part (a), if below are some selected ratios for Bell Air Ltd for 2019 and 2020, evaluate the entitys liquidity (1 mark).

The financial statements of Bell Air Ltd appear below: Statements of Financial Position 2017 and 2018 Assets 2018 2017 Cash ..... $ 250,000 $ 400,000 Marketable securities 150,000 600,000 Accounts receivable (net) 500,000 300,000 Inventory 1,500,000 1,700,000 Property, plant and equipment (net) 1,600,000 2,000,000 Total assets $4,000,000 $5,000,000 Liabilities and Equity Accounts payable $ 200,000 $ 300,000 Short-term (current) notes payable 400,000 900,000 Debentures (non-current) payable 800,000 2,005,000 Share capital 1,700,000 1,045,000 Retained earnings 900,000 750,000 Total liabilities and equity.......... $4,000,000 $5,000,000 Income Statement For the year ended 31 December 2018 Net sales $3,600,000 Cost of sales 1,840,000 Gross profit 1,760,000 Expenses Interest expense $240,000 Selling expenses 300,000 Administrative expenses 200,000 Total expenses 740,000 Profit before income tax 1,020,000 Income tax expense 300,000 Profit after tax $ 720,000 Additional information: Assume all sales were on account. 2020 2019 1.1:1 1.9:1 Current ratio Quick ratio 0.7:1 1.1:1 Average collection period 30 days 25 days