Read the following information carefully and answer the questions that follow: Roshani Gurung was brought in as assistant to Krishna Thapa, Chairman of Jagadamba Trading Company, who had the task of…

Read the following information carefully and answer the questions that follow: Roshani Gurung was brought in as assistant to Krishna Thapa, Chairman of Jagadamba Trading Company, who had the task of getting the company back into a sound financial position. Jagadamba's 2026 balance sheets and income statements, together with projections for 2025, are shown in the following tables. The tables also show the 2026 financial ratios, along with industry average data. The 2025 projected financial statement data represent Gurung's and Thapa's best guess for 2025 results, assuming that some new financing is arranged to get the company out of difficulties.

Jagadamba Trading Concern: Balance Sheet Assets20262025ECashRs 7,282Rs 14,000Short-Term Investments20,00071,632Accounts Receivable632,160878,000Inventories1,287,3601,716,480Total Current AssetsRs 1,946,802Rs 2,680,112Gross Fixed Assets1,202,9501,220,000Less: Accumulated Depreciation263,160383,160Net Fixed AssetsRs 939,790Rs 836,840Total AssetsRs 2,886,592Rs 3,516,952Liabilities And Equity20262025EAccounts PayableRs 324,000Rs 359,800Notes Payable720,000300,000Accruals284,960380,000Total Current LiabilitiesRs 1,328,960Rs 1,039,800Long-Term Debt1,000,000500,000Common Stock (100,000 Shares)460,0001,680,936Retained Earnings97,632296,216Total EquityRs 557,632Rs 1,977,152Total Liabilities and EquityRs 2,886,592Rs 3,516,952

Jagadamba Trading Concern: Income Statement 20262025ESalesRs 5,834,400Rs 7,035,600COGS (except depreciation)4,980,0005,800,000Depreciation116,960120,000Other Expenses720,000612,960Total Operating CostsRs 5,816,960Rs 6,532,960EBITRs 17,440Rs 502,640Interest Expense(176,000)(80,000)EBTRs (158,560)Rs 422,640Taxes (40%)63,424(169,056)Net IncomeRs (95,136)Rs 253,584Other Data20262025EStock PriceRs 6.00Rs 12.17Shares Outstanding100,000250,000EPSRs (0.951)Rs 1.014Book Value Per ShareRs 5.576Rs 7.909

Financial Ratios20262025EIndustry AverageCurrent Ratio1.5?2.7Quick Ratio0.5?1.0Inventory Turnover4.0?6.1Days Sales Outstanding39.5?32.0Fixed Assets Turnover6.2?7.0Total Assets Turnover2.0?2.5Debt Ratio80.7%?50.0%Time Interest Earned (TIE)0.1?6.2Profit Margin-1.6%?3.6%Return on Asset-3.3%?9.0%Return on Equity-17.1%?17.9% Note: "E" indicates estimated. The 2025 data are forecasts.

Roshani must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions: a. Calculate the 2025 current and quick ratios based on the projected balance sheet and income statement data. Compare the liquidity position of the company with 2026 and industry average. b. Calculate the 2025 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Compare the firm's utilization of assets with 2026 and industry average. c. Calculate the 2025 debt ratio, and times-interest earned. How does the company compare with the industry with respect to financial leverage? d. Calculate the profit margin, return on assets (ROA), and return on equity (ROE) for 2025. Compare the profitability of the company with 2026 and industry average. e. Describe the limitations of ratio analysis. [3+5+4+5+3]