Uchida Genetics Corporation develops and markets biological pharmaceuticals. Uchida is approaching the bond market to raise money to buy equipment to manufacture a new biological therapy. The following is an extract from Uchida Genetics’ statement of financial position:

Required

a. Prior to approaching the bond market, Uchida’s management would like you to determine the company’s debt to equity and net debt as a percentage of capitalization ratios for both years.

b. Explain whether Uchida’s debt to equity ratio and net debt as a percentage of capitalization ratios have improved in 2020.

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UCHIDA GENETICS CORPORATION Statement of Financial Position (in thousands) December 31, December 31, 2019 2020 Current assets $ 245,000 $ 260,000 Cash Trade receivables 255,000 570,000 Inventories 300,000 400,000 $ 800,000 Total current assets $1,230,000 Non-current assets Property, plant, and equipment $1,250,000 $1,050,000 Right-of-use-assets 150,000 200,000 Intangible assets 15,000 10,000 Total non-current assets $1,415,000 $1,260,000 Total assets $2,215,000 $2,490,000 Current liabilities Trade and other payables $ 15,000 $ 25,000 Short-term borrowings 200,000 275,000 Current portion of long-term debt 50,000 60,000 Total current liabilities $ 265,000 $ 360,000 Non-current liabilities Long-term loan $ 500,000 $ 800,000 Deferred income tax liabilities 50,000 55,000 Total non-current liabilities $ 550,000 $ 855,000 Shareholders' Equity Share capital $ 900,000 $ 900,000 Retained earnings 500,000 375,000 Total shareholders' equity $1,400,000 $1,275,000 Total liabilities and shareholders' equity $2,215,000 $2,490,000