Session 2 Assignments : Liquidity and solvency: exclude second question case 2

Assignment 1:

If we know the following financial data about XYZ company in 2020, current assets EGP 5MM, current
liabilities EGP 3MM, cash is EGP 1MM, inventory EGP 2MM, A/R EGP 1.5MM and marketable
securities is EGP 500M. Calculate the company’s liquidity ratios and comment on each

(Working Capital, Current Ratio, Quick Ratio and Cash Ratio.)

If the short term debt recorded EGP 2MM, Long term debt EGP 3MM, total liabilities EGP 6MM and
tangible net worth EGP 3MM, calculate the company’s solvency ratios (financial leverage and gearing
ratios) given that the financial leverage industry bench mark is 1.5:1.

Assignment 2 “Bonus”:

The financial reporting of GHT Company revealed the following figures:

2017 2018 2019

Cash 5,823 2,446 604
Marketable Securities 0 0 0
Accounts Receivables A/R 19,886 25,437 47,218
Inventory 129,615 130,867 102,654
Advance payment to Suppliers 1,819 1,226 1,084
Current Assets 157,143 159,976 151,560
Short term debt (bank borrowing) 143,071 132,949 144,010
Accounts Payables 18,675 32,520 21,760
Accrued expenses 2,163 2,658 5,333
Down payments from customers 233 648 4
Current Liabilities 194,790 211,192 235,942
Total long term debt 51,099 66,194 55,631
Total liabilities 256,030 289,856 304,320
Net worth 141,155 146,285 189,775
Intangibles 25 2,693 4,183
Sales 580,730 727,290 729,168

Calculate the company’s liquidity and solvency ratios represented in the current ratio, quick ratio,
cash ratio, A/R turn over, financial leverage and gearing ratio across years and add you comment on
each considering that the bench mark for the leverage in the industry is maximum of 1.3:1.