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.

Required:

a) Compute the following ratios for Bel Air for 2018 :

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 .

	2020	2019
Current ratio	1.1:1	1.9:1
Quick ratio	0.7:1	1.1:1
Average collection period	30 days	25 days