2. Case 2. Need for Speed is a leading supplier of vehicle spare parts used for automobile industries across the world. Stated below are extracts from the financial statements of Need for Speed (in millions of BD) Year 2019 2020 Cash and cash equivalents 1144 987 Accounts receivable 1000 1172 Inventories 789 890 Total Current Assets 2933 3049 Property, plant & equipment 1351 1285 123 198 Investments and long-term receivables Goodwill 456 500 Other assets 238 273 Total Assets 5101 5305 311 221 Current maturities of long- term debt Accounts payable (trade) 779 942 Income tax payable 38 46 Other accrued liabilities 279 284 Total Current Liabilities 1407 1493 Long-term debt 780 831 740 762 Pension and post-retirement obligations Other non-current liabilities 388 381 Total Liabilities 3315 3467 763 754 Common stock, $1.00 par value Additional paid-in capital 2613 2643 Retained deficit -590 -259 Total equity 2786 3138 6109 7592 Sales and other operating revenues Cost of sales 5450 6697 Gross Profit 659 895 Total other expenses 392 453 Operating income /loss 267 442 Interest expense -89 -79 Interest income 14 46 Net income / loss 192 409 a) Calculate the current ratio and acid test ratio for the two years. (2 marks) Which of these ratios would be a better indicator of liquidity and from the calculations what can you infer about the immediate liquidity position of the company? (4 marks) b) Calculate the debt-equity ratio for both years. (2 marks) What do the ratios indicate and how may it affect the future prospects of the company? (4 marks) c) Calculate gross profit margin for both years. What is your observation about your calculation? (2 marks) (4 marks) d) Calculate the average period of credit given or debtor turnover ratio for both years. (3 marks) e) What does a lengthening debtor turnover ratio indicate? (4 marks)