The management of Hencky Corporation is developing a loan proposal to present to a local investor. The company is looking for a $1-million loan to finance the research and development costs of producing a revolutionary new wearable computer. Most of the loan proceeds will be spent on intangible costs, such as research salaries, and this will therefore be a very risky investment. Because of the risk associated with the project, the investor is requiring some assurance that the company is currently solvent and operating as a going concern.
As the accountant for Hencky Corporation, you have used the most recent financial statements to calculate the following ratios:

Required

Provide an explanation of how each of the above ratios should be interpreted and what they specifically tell you about Hencky’s solvency and ability to continue as a going concern.

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2020 1.8:1 2019 Current ratio 1.7:1 1.08:1 11 times 5 times 35.8% | Quick ratio Accounts receivable turnover Inventory turnover Debt to equity ratio 1.10:1 10 times 6 times 25.2%