2.

Based on the calculation above number (1) The Liquidity and Profitability condition of the
company for both years are given below:
Liquidity Condition of the Company: Here, two ratios can explain the liquidity condition. These
are Account receivable turnover and acid-test-ratio.
These ratios can measure the short-term ability of the company to pay its maturing obligations
and to meet unexpected needs for cash.
2019 2018
Accounts Receivable turnover =
5.45׿ ¿ 7.28׿ ¿
365 365
Average collection period in terms of days = =
5.45 7.28
= 66.97 days = 50.14 days

In 2019 the company on average receive or collects Accounts receivable in 66.97 days, in 2018 it
takes 50.14 days. Shorter collection period is good for the company. In 2018, the company’s
Accounts receivable turnover is quite good rather than 2019.
2019 2018
Acid-test ratio =
1.57 1.27
This ratio measures immediate liquidity. In 2019 this ratio provides good return rather than year
2018. Means quick current assets raises in terms of liability in years 2019 rather than 2018.
So, the liquidity condition of the company is quite good for year 2019 than tear 2018 as cash
generation ability is quite high for the year 2019 than previous year.
Profitability Condition of the company: Here, two ratios can explain the profitability condition of
the company which are given below.
2019 2018
Net Profit margin =
31.777 41.197
Asset turnover ratio = 0.57 times 0.59 times
Profit margin measures the percentage of each dollar sales that results in net income. Higher
profit margin is preferable. On the other hand Asset turnover ratio measures how efficiently
assets are used to generate sales and therefore revenue. So, both of these ratios which is higher is
preferable.
In 2018, the company’s profit margin and Asset turnover ratios are relatively higher than the year
2019. Which indicates that in 2018 the company more efficiently used its assets to generate sakes
and greater income reflects on this rather than year 2019.
So, in terms of profitability, the condition of the company in year 2018 is better than year 2019.
In conclusion we can say that, this company was doing good in year 2018 rather than year 2019
based on its liquidity and profitability condition.