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Question 1(a) ABC Computers income statement for 20X9 and the balance sheet for December 31, 20X9 are as follow. Compute the financial ratios for ABC Computer for 20X9. : Question 1(b) Assuming that based on the ratios calculated in the previous part, the firms liquidity was found to have relatively poorer performance. Indicate (yes or no) if the following actions proposed by the CFO will help improve the liquidity. Explain.

(i) Sell new equity and use the proceeds to purchase a new plant site. Question 1(b) (ii) Use cash and marketable securities to pay off short term bank borrowings and account payable. Immersive Reader Question 1(b) (iii) Borrow long-term and use the proceeds to pay off short term debt.Immersive Reader (3 Points) Question 1(b) (iv) Sell surplus fixed assets and invest the proceeds in marketable securities.

ABC Computer Income Statement for Year Ending 20X9 20X9 Sales $25,265,000 Cost of goods sold 19,891,000 Gross profit $ 5,374,000 Selling, general, and administrative expense 2,761,000 Depreciation 156,000 Operating profit Interest expense 34,000 Nonoperating income (expense) 26,000 Pretax income $ 2,449,000 Total income taxes 785.000 Net income $ 1,664,000 $2,457,000 ABC Computer Balance Sheet for December 31, 20X9 20X9 S 4,132,000 2,678,000 391,000 480,000 $ 7,681,000 1,059,000 294,000 S 765,000 2,721,000 304,000 $11,471,000 ASSETS Cash and equivalents Accounts receivable Inventories Other current assets Total current assets Ver Gross plant, property, and equipment Accumulated depreciation Net plant, property, and equipment Other investments Intangibles Other assets Total assets LIABILITIES Accounts payable Accrued expenses Other current liabilities Total current liabilities Long-term debt Other liabilities Total liabilities EQUITY Common stock Capital surplus Retained earnings Total equity Total liabilities and equity S 3,538,000 337,000 1,317,000 S 5,192,000 508,000 463,000 S 6,163,000 $ 25,750 3,557,250 1,725,000 S 5,308,000 $11,471,000 INDUSTRY NORMS 1,49 1.36 53.38 6,84 20.87 FIRM LIQUIDITY Current ratio Acid-test ratio Average collection period Accounts receivable turnover Inventory turnover OPERATING PROFITABILITY Operating income return on investment Operating profit margin Net profit margin Total asset turnover Fixed asset turnover FINANCING DECISIONS Debt ratio Times interest earned 9.00% 6.00% 3.50% 1.58 13.02 0.47 14.79 RETURN ON EQUITY Return on equity 13.00%

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