Refer to Table 1 & 2 below, to evaluate on the following variables:
a) Determine the liquidity for both years, by calculating the current ratio, quick ratio and working capital.                                                                                                                             (6 marks)

b) Determine the solvency for both years, by calculating the solvency ratio, debt to equity ratio and debt to assets ratio.                                                                                           (6 marks)            

c) Determine the management's ability to utilise the company's assets, by calculating the inventory turnover in 2020 (days),  and total assets turnover ratio for both years.  
                                                                                                                                        (3 marks)

d) Determine the restaurant's profitability by calculating the gross profit margin (%), net income (%), return on assets ratio and return on equity ratio for both years.                            (8 marks)

e) In conclusion, summarise the ratio analysis result, and justify your recommendation on this investment opportunity.                                                                                       (20 marks)
 

Table (1) GOOD FOOD RESTAURANT
Condensed Income Statement and
Statement of Retained Earnings and Investor Information
For the Periods Ending December 31, 2019 and 2020
Income Statement	2019	2020
Sales	552,500	742,205
Cost of Goods Sold	227,075	259,800
Gross Profit	325,425	482,405
Operating Expenses (excluding depreciation)	160,225	280,275
Depreciation	60,000	59,000
Operating Income (EBIT)	105,200	143,130
Interest	34,000	15,863
Income Before Income Taxes	71,200	127,267
Income Taxes (40%)	28,480	50,907
Net Income	42,720	76,360
Statement of Retained Earnings and Investor Information
Retained Earnings
Retained Earnings, Beginning	154,480	177,200
Net Income	42,720	76,360
Subtotal	197,200	253,560
Cash Dividends Paid	20,000	50,000
Retained Earnings, Ending	177,200	203,560
Investor Information
Market Price per Share	$10.00	$65.00
Earnings per Share	$1.42	$6.07
Table (2) GOOD FOOD RESTAURANT
Balance Sheets
December 31, 2019 and 2020
	2019	2020
Assets
Current Assets
Cash	42,000	30,000
Marketable Securities	93,000	80,000
Net Receivables	138,000	152,000
Inventories	5,000	6,000
Total Current Assets	278,000	268,000
Property and Equipment	1,200,000	1,091,760
Less Accumulated Depreciation	200,000	141,000
Net Property and Equipment	1,000,000	950,760
Total Assets	1,278,000	1,218,760
Liabilities and Owners' Equity
Current Liabilities
Accounts Payable	107,000	45,000
Notes Payable	15,000	59,000
Accrued Wages	38,000	23,000
Total Current Liabilities	160,000	127,000
Long-Term Liabilities
Long-Term Debt	340,800	138,200
Total Liabilities	500,800	265,200
Owners' Equity
Capital Stock	600,000	750,000
Retained Earnings	177,200	203,560
Total Owners' Equity	777,200	953,560
Total Liabilities and Owner's Equity	1,278,000	1,218,760

Answer rating: 100% (QA)

a Liquidity Analysis Current Ratio Current Assets Current Liabilities Quick Ratio Current Assets Inv... View the full answer