## Answers

Ans. | ||||

Type of ratio | Formula | Year 2 | Year 1 | Explanation |

(%) | (%) | |||

Debt to Equity | Total Liability/Total Shareholders Equity | 1.99 | 4.61 | This ratio represend liability percentage on shareholders fund. |

Reduced ratio show that liability getting reduced or equity getting enhanced. | ||||

Gross Profit percentage | Gross Profit/Turnover | 38 | 41 | Reduced ratio represent that COGS increased than sales. |

Quick | (Current Assets - Inventory)/ Current Liability | 2 | 1.5 | This ratio tell liquidity capacity of company to pay current liability. |

Enhancemen of this ratio is good sign of liquidity. | ||||

Inventory turnover | Turnover/ Average Inventory | 4.5 | 3.25 | Higher turnover indicated that selling capacity is increasing. Which is good sign. |

Return on equity | Net Income/ Shareholders Equity | 3 | 8 | This ratio indicate percentage of return over shareholders fund. |

Reduction of this ratio is not good sign entually. | ||||

It is to be noted that COGS is higher due to which Gross Profit Ratio got reduced this year. | ||||

So capital Stock issued during the year. |

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