$(1)$ Write out the formula for each ratio you selected and show your calculations.

Ratio of Liabilities to Owner's $($Stockholders$\text{'})$ Equity: Total liabilities$/$Shareholders$\text{'}$ equity. Year $20$Y$1$: $$2,380,\frac{000}{\text{\$}}6,375,000=\mathrm{.}37**100=37\mathrm{.}3\%$ Year $20Y2$ :

$$2,600,\frac{000}{\text{\$}}7,180,000=\mathrm{.}362**100=36\mathrm{.}21\%$

Current Ratio: Current assets$/$Current liabilities. Year $20$Y$1$: $$3,089,\frac{000}{\text{\$}}880,000=3\mathrm{.}51$ Year $20$Y$2$: $$3,690,\frac{000}{\text{\$}}900,000=4\mathrm{.}1$ Year $20$Y$2$: $$3,690,\frac{000}{\text{\$}}900,000=4\mathrm{.}1$

Inventory Turnover: Cost of goods$/$Average inventory. The average inventor is found by taking the total inventories$/2.$ Year $20$Y$1$: $$950,\frac{000}{2}=$$$475,000,$$$4,950,\frac{000}{\text{\$}}475,000=10\mathrm{.}4$ Year $20$Y$2$: $$1,119,\frac{000}{2}=$$$595,000,$$$5,350,\frac{000}{\text{\$}}595,000=8\mathrm{.}99(9\mathrm{.}0)$

$(2)$ Discuss whether each ratio you selected measures liquidity or profitability and what those terms mean.

Ratio of Liabilities to Owner's $($Shareholders$\text{'})$ Equity measures profitability. The higher the ratio, the greater the profitability. Continued growth in profitability relative to equity would demonstrate financial health.

Current Ratio measures liquidity, which refers to a company's ability to pay off its shortterm obligations. The higher the current ratio indicates a greater liquidity.

Inventory $($asset$)$ turnover ratio measures profitability, in this case how efficiently a company uses its assets to generate sales revenue. The higher the ratio, the better.

$(3)$ What factor$($s$)$ contributed to the increase or decrease from last year? Discuss whether those changes were favorable or unfavorable to the company and why?