Question

Assessing a Firm's Profitability, Liquidity and Solvency Presented below is financial data for the Outback Company as of year-end 2018 and 2019: 2019 Current Assets 568,750 570.000 Total Assets 100,000 130.000 Current Liabilities 27.500 40,000 Total Labites 0.000 91,000 Net Sales 140.000 190,000 Nel Income 22,400 26,600 Required Calculate Outback's current ratio, debt-to-total-assets ratio, and return on sales ratio. Comment on the trend in the company's profitability, liquidity, and solvency from 2018 to 2019. 2018 2019 Current ratio Round to one decimal point. Det to-total assets fato Round to be decimal point Return on sales ratio Round to one decimal point 90 Check

Answer 1

Solution :

	2018		2019
	Working		Working
Current Ratio (Current Assets / Current Liabilities)	$ 68,750 / $ 27,500	2.5	$ 70,000 / $ 40,000	1.8
Debt to Total Assets Ratio (Total Outside Liability / Total Assets)*	$ 80,000 / $ 100,000	80%	$ 91,000 / $ 130,000	70%
Return on Sales (Net Income / Sales)	$ 22,400 / $ 140,000	16%	$ 26,600 / $ 190,000	14%

*Another Approach is :

	2018		2019
Debt to Total Assets Ratio (Non Current Liability / Total Assets)	($ 80,000 - $ 27,500)/ $ 100,000	52.5%	($ 91,000 - $ 40,000) / $ 130,000	39.2%

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