The following is the Statement of Financial Position of Covid 19 Corp. as of December 31, 2019. The firm is earning 10% return on fixed assets (non-current assets) and 2% return on current assets.

Find out the effect on liquidity and profitability of the firm on the following assumptions:

1. Increase current assets by 25% maintain Total Assets = 12,000,000

2. Decrease current assets by 25% maintain Total Assets = 12,000,000

Explain the evaluation of the effect on liquidity vs profitability.

ASSETS LIABILITIES & SHAREHOLDERS' EQUITY CURRENT ASSETS 2,000,000 CURRENT LIABILITIES 1,000,000 NON-CURRENT ASSETS 10,000,000 NON-CURRENT LIABILITIES 6,000,000 SHAREHOLDERS' EQUITY 5,000,000 TOTAL ASSETS 12,000,000 TOTAL LIABILITIES & SHE 12,000,000 Explain the evaluation of the effect on liquidity vs profitability