The following financial information has been taken from the year-end accounts of Wellingtons TulipTower hotel.

Year 20X1 20X2

Cash at bank $20,000 $24,000

Accounts receivable 11,500 13,500

Prepaid expenses 3,400 4,200

Inventory 10,900 12,000

Current liabilities 32,000 31,000

Long-term debt 250,000 232,000

EBIT 285,000 321,000

Interest on debt 16,000 14,300

Total assets 450,000 465,000

Required

a For 20X1 and 20X2, calculate TulipTowers:

i Current asset ratio

ii Acid test ratio

b From your answers to part a, comment on TulipTowers liquidity status in 20X1 and 20X2.

c For 20X1 and 20X2, calculate TulipTowers:

i Debt to assets ratio

ii Times interest earned

d From your answers to part c, comment on TulipTowers trend with respect to long-term financial stability