Sea Tech Company is a wholesale distributor of scuba diving equipment and supplies. The companys sales have

Question:

Sea Tech Company is a wholesale distributor of scuba diving equipment and supplies. The company€™s sales have averaged about $2,000,000 annually for the 3-year period 2013€“2015. The firm€™s total assets at the end of 2015 amounted to $1,250,000.
The president of Sea Tech Company has asked the controller to prepare a report that summarizes the financial aspects of the company€™s operations for the past 3 years. This report will be presented to the board of directors at their next meeting.
In addition to comparative financial statements, the controller has decided to present a number of relevant which can assist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated the following ratios for the 3-year period 2013€“2015.

In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data to determine if the ratios themselves reveal any significant trends over the 3-year period.

Instructions
(a) The current ratio is constant while the acid-test (quick) ratio is increasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.
(b) In terms of the ratios provided, what conclusion(s) can be drawn regarding the company€™s use of financial leverage during the 2013€“2015 period?
(c) Using the ratios provided, what conclusion(s) can be drawn regarding the company€™s net investment in plant andequipment?

Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...