1. Stating the problem: We need to compute various financial ratios including liquidity, profitability, solvency, and activity ratios based on given financial data. 2. Liquidity Ratios formulas: - Current Ratio = $\frac{Current\ Assets}{Current\ Liabilities}$ - Quick Ratio = $\frac{Current\ Assets - Inventory}{Current\ Liabilities}$ - Cash Ratio = $\frac{Cash\ and\ Cash\ Equivalents}{Current\ Liabilities}$ 3. Profitability Ratios formulas: - Gross Profit Margin = $\frac{Gross\ Profit}{Net\ Sales} \times 100$% - Net Profit Margin = $\frac{Net\ Income}{Net\ Sales} \times 100$% - Return on Assets (ROA) = $\frac{Net\ Income}{Total\ Assets} \times 100$% - Return on Equity (ROE) = $\frac{Net\ Income}{Shareholders'\ Equity} \times 100$% - Return on Investment (ROI) = $\frac{Net\ Profit}{Investment} \times 100$% 4. Solvency Ratios formulas: - Debt Ratio = $\frac{Total\ Liabilities}{Total\ Assets}$ - Equity Ratio = $\frac{Total\ Equity}{Total\ Assets}$ - Debt to Equity Ratio = $\frac{Total\ Liabilities}{Total\ Equity}$ - Times Interest Earned = $\frac{EBIT}{Interest\ Expense}$ 5. Activity Ratios formulas: - Asset Turnover = $\frac{Net\ Sales}{Average\ Total\ Assets}$ - Accounts Receivable Turnover = $\frac{Net\ Credit\ Sales}{Average\ Accounts\ Receivable}$ - Average Collection Period = $\frac{365}{Accounts\ Receivable\ Turnover}$ - Accounts Payable Turnover = $\frac{Cost\ of\ Goods\ Sold}{Average\ Accounts\ Payable}$ - Average Payment Period = $\frac{365}{Accounts\ Payable\ Turnover}$ - Inventory Turnover = $\frac{Cost\ of\ Goods\ Sold}{Average\ Inventory}$ - Average Inventory Period = $\frac{365}{Inventory\ Turnover}$ 6. Explanation: Each ratio measures a specific aspect of financial health. Liquidity ratios assess the ability to meet short-term obligations. Profitability ratios evaluate earnings relative to sales, assets, or equity. Solvency ratios measure long-term financial stability. Activity ratios analyze efficiency in using assets and managing receivables, payables, and inventory. 7. To compute these ratios, plug in the respective values from the financial statements into the formulas above. Simplify and calculate each ratio step-by-step. Note: Since no specific numerical data was provided, formulas and explanations are given for you to apply with your data.