The following selected liquidity and solvency ratios are available for two companies operating in the fast food industry:

Instructions
Assume that you are the credit manager of the local bank. Answer the following questions, using relevant ratios to justify your answer.
(a) Both Grab 'N Gab and Chick 'N Lick have applied for a short-term loan from your bank. Which of the two companies is more liquid and should get more consideration for a short-term loan? Explain.
(b) Both Grab 'N Gab and Chick 'N Lick have applied for a long-term loan from your bank. Are you concerned about the solvency of either company? Explain why or why not.

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Chick N Lick Industry Average Grab 'N Gab 0.9:1 Current ratlo Recelvables turnover Inventory turnover Debt to total assets Times Interest earned 0.8:1 46 times 39 times 49% 10 times 0.7:1 38 times 45 times 40% 5 times 34 times 31 times 39% times