$15-1.($Risk$-$return trade$-$off$)$ Ramsey Liquors owns and operates a chain of beer and

wine shops throughout the Dallas$-$Fort Worth metroplex. The rapidly expanding

population of the area has resulted in the firm requiring a growing amount of funds.

Historically, the firm has reinvested earnings and borrowed using short$-$term bank

notes. Balance sheets for the last $5$ years are found below.

a$.$ Compute the firm's current ratio $($current assets divided by current liabilities$)$

and the firm's debt ratio $($current plus long$-$term liabilities divided by total

assets$)$ for the $5-$year period found above. Describe the firm's risk using both

the current ratio and debt ratio.

b$.$ Alter the financial statements above such that current liabilities remain con$-$

stant at $$50$ and long$-$term liabilities increase in the amount needed to meet the

firm's financing requirements. Compute the firm's current ratio $($current assets

divided by current liabilities$)$ and the firm's debt ratio $($current plus long$-$term

liabilities divided by total assets$)$ using the revised financial statements you

have prepared for the $5-$year period $2014-2018.$ Describe the firm's risk using

both the current ratio and debt ratio.

c$.$ Which of the financing plans is more risky? Why?