You have been provided with the following information for a small private company, Formosa Pty...
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You have been provided with the following information for a small private company, Formosa Pty Ltd, whose competitors are predominately large public companies. + Net profit margin Return on equity Current ratio Quick ratio Receivables turnover Inventory turnover 2017 8.2% 13.1% 1.8 1.2 12.2 4.7 2018 7.5% 12.3% 2.1 1.1 12.6 4.5 2019 6.8% 11.1% 2.4 0.9 13.0 4.2 INDUSTRY AVERAGE 2019 8.0% 13.5% 2.0 1.2 13.0 4.8 REQUIRED: (a) Comment on the trend of each of the six ratios for Formosa Pty Ltd in relation to the company's profitability and liquidity. For each ratio, describe what the ratio measures. (word limit 500). (b) Explain the difference between liquidity and solvency when analyzing a company's financial statements. (word limit 150)
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