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 hand-held computer. Most of the loan proceeds will be spent on intangible costs, such as 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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2010 200 Industry Average 0.75:1 4 times 3.8 times Ratio Current ratio Quick ratio Accounts receivable turnover Inventory turnover 1.7:1 0.80: 1 8 times7.75 times12 times 7 times