Trek Inc. Statement of Earnings For the year ended December 31, 2020 (in thousands of dollars) Sales $1,640 Cost of sales (800) Gross profit 840 Depreciation expense (40) Selling and administrative expenses (400) Earnings from operations 400 Loss on sale of equipment Interest expense _(24) Earnings before income taxes 370 Income tax expense (100) Net earnings 270 Trek Inc. Summary Statement of Financial Position (in thousands of dollars) Dec. 31, 2020 Dec. 31, 2019 Assets Cash $ 52 $ 60 Short-term Investments 80 40 Account Receivable (net) 198 80 Inventories 240 160 Prepaid Expenses 3 7 Property, plant and Equipment (net) 857 853 Total Assets $1,430 $1,200 Liabilities and Shareholders' Equity Current Liabilities $ 240 $ 160 Bonds Payable 200 200 Common Shareholders' Equity 990 840 Total Liabilities and Shareholders' Equity $1,430 $1,200 Additional information: a) Trek, Inc. purchased new equipment in 2020 for $55,000. It also sold used equipment during the year. b) Trek Inc. had 84,000 common shares outstanding at December 31, 2019. On January 2, 2020. Trek Inc. sold and issued 6,000 additional common shares for a total amount of $60,000. There were no other transactions affecting common shares during 2020. The market price per share was $33 at December 31, 2020. Trek's board of directors declared dividends at December 31, 2020. payable in January 2021. 2 Marks 2 The quick ratio measures the ability of the company Select one: a to pay its total liabilities with cash on hand Ob to pay its current liabilities using quick assets c. to pay its current liabilities with current assets O d. to transform its total assets into cash Notes 2 Ma Which of the following is NOT TRUE about the inventory turnover ratio? Select one: O a The ratio measures how many times average inventory was purchased and sold during the period O b. If an ice cream stand has consistently weak sales due to rainy weather, this would likely result in a low inventory turnover ratio. O c. A company's inventory turnover ratio should be compared across the years and to its competitors' Inventory turnover ratios in order to conclude whether it is favorable or not. O d. A high turnover ratio typically means a company has weaker sales and declining demand for a company's product