The following are the accounts of xyxyxy Co, a business which provides service support (cleaning) to customers worldwide.

2021 Bwp (m)		2020 Bwp (m)
Sales revenue Cost of sales Gross profit Current assets Inventories Receivables (note 1) Short-term deposits and cash Current liabilities Loans and overdrafts Tax on profits Accruals Payables (note 2) Net current assets Notes: Trade receivables Trade payables	2,176.2 1,659.0 517.2 42.7 378.9 205.2 626.8 32.4 67.8 11.7 487.2 599.1 27.7 295.2 190.8		2,344.8 1,731.5 613.3 78.0 431.4 145.0 654.4 81.1 76.7 17.2 467.2 642.2 12.2 335.5 188.1

Required:

a. Calculate the liquidity and working capital ratios.  

b. Comment on the results of your calculations. 

c. Explain the limitations of relying on the ratios. 

Answer rating: 100% (QA)

Required a A Liquidity ratio means ability to pay the short term debt or convert the assets for paym... View the full answer