The financial statements of ABC Limited include the following information: Statement of financial position: 2017 2016 Assets Current assets Cash $15,000 $10,000 Accounts receivable 30,000 25,000 Inventory 75,000 75,000 Prepaid insurance 10,000 15,000 Total current assets $130,000 $125,000 Property, plant and equipment, net 400,000 315.000 Total assets $530,000 $440,000 Liabilities Current liabilities Accounts payable Salaries payable Total current liabilities Long-term liabilities Total liabilities $40,000 25,000 $65,000 75,000 140,000 $50,000 40.000 $90,000 150,000 240,000 Shareholders' Equity Share capital Retained earnings Total shareholders' equity Total liabilities and equity $290,000 100,000 390,000 $530,000 $150,000 50,000 |_ 200,000 $440,000 Income statement Sales (all on credit) Less: Cost of goods sold Gross profit Less: Operating expenses Operating profit Less: Interest expense Profit before tax Less: Income tax expense Profit for the year 2017 $400,000 210,000 190,000 55,000 135,000 15,000 120,000 50,000 $ 70.000 Required: (Round the answers to 2 decimal places.) (14 marks) a. Calculate the following ratios for ABC Limited for the year 2017: i) Profit as a percentage of sales ii) Return on assets iii) Return on equity iv) Current ratio v) Quick ratio vi) Accounts receivable turnover rate vii) Inventory turnover rate b. Comment on ABC Limited's overall profitability based upon the ratios calculated in (a). (4 marks) Additional information The following information is available for XYZ Limited, a competitor with similar size of ABC Limited for the year 2017. 1.2 Current ratio Quick ratio Accounts receivable turnover rate Inventory turnover rate Profit as a percentage of sales Return on assets Return on equity 20 times 1.8 times 10.5% 19.8% 15% Required: c. By comparing the ratios calculated in (a) with those of XYZ Limited, which company do you consider to have the lower credit risk faced by short-term creditors. Explain. (3 marks) d. By comparing the ratios calculated in (a) with those of XYZ Limited, which company do you consider to have better profitability. Explain