Note: only partial balance sheet information provided; do not average balance sheet data when calculating ratios; the 20X1 and 20X2 ratio columns are for your convenience when answering the questions and will not be graded

Knicherdoodles, Inc.	20X1	20X2		Industry averages ratios (360 day year)		20X1	20X2
Sales (all credit)	$740	$785		Current ratio	4.1	?	?
COGS	430	440		Quick ratio	2.1	?	?
Operating Exp (Excluding Depreciation)	150	160		A/R collection period	47	?	?
Interest	33	35		Inventory turnover	2.1	?	?
Dividends	16	17		Total asset turnover	0.35	?	?
Depreciation Expense	100	110		Fixed asset turnover	0.45	?	?
Cash	70	75		Gross margin	41.20%	?	?
Accounts receivables	563	502		Operating margin	11.10%	?	?
Accounts payable	390	405		Times interest earned	4.3x	?	?
Inventory	662	640
Long-term debt	340	410
Net fixed assets	1,680	1,413
Total Assets	2,960	2,983
Common stock	700	235
Tax rate	35%	35%

Which of the following statements best describes the liquidity position of Knickerdoodle? (you must choose from the provided combinations)

I. Better than the industry average and still improving

II. Better than the industry average but falling

III. Worse than the industry average

IV. The quality of the firms accounts receivable is probably low

V. The firm has proven to be a very efficient inventory manager

• II and V
• III and V
• III, IV and V
• I, IV and V