Hamburg Ltd is a trading company that provides you with a comparative financial statement for the financial year 2019 and 2020 as presented below.

31 Dec 2020	31 Dec 2019
Revenue (sales on credit)	$234 000	$216 000
Cost of sales	183 000	118 500
Other expenses	18,000	40 000
Cash and cash equivalents	(15 000)	28 000
Inventories	54 500	37 000
Trade accounts receivable (net)	50 000	28 000
Non-current assets (net)	77 000	46 000
Trade accounts payable	18 500	19 000
Share Capital	108 000	120 000
Non-current liabilities	23 000	—

Required (show your working):

The manager of the company, Mr. Steven is concerned about the ability of the company to pay its short-term obligation and asked you to analyze the company’s liquidity for the 2020 financial year by assessing the following items (rounded to 2 decimal places if needed).

1. Current ratio

2. Quick ratio

3. Accounts receivable turnover and average collection periods

4. Inventory turnover and average days to sell the inventory

5. Analyze and comment on the company’s liquidity of 2020 by comparing to its liquidity position of 2019 as follows: Current ratio 4.89:1, Quick ratio 2.95:1, Receivable turnover 10.29 and collection period of 35.47 days, Inventory turnover 5 times and days of inventory 73 days.

Answer rating: 100% (QA)

a Current ratio Current Assets Current liabilities for 2020 89000 18500 483 Current ratio for 20... View the full answer