Concept explainers
Acid-test ratio: Acid-test ratio is ability of a company to pay back its immediate liabilities with its short term assets. This ratio can also be called as a
Financial leverage: It is the amount of debt used by an entity to buy assets.
(a) To identify and explain: To identify the contributing factor for this apparently divergent trend using the ratios provided. The current ratio is increasing while the acid-test (quick) ratio is decreasing.
Given information: All the related information is provided in the question document.
(b) To determine: To determine the conclusion can be drawn regarding the company's use of financial leverage during the 2015-2017 periods.
Given information: All the related information is provided in the question document.
(c) To determine: To determine the conclusion can be drawn regarding the company's net investment in plant and equipment.
Given information: All the related information is provided in the question document.
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