Assume that you have been hired as an analyst by the MBD Bank. Your team is working on an independent assessment of Dar Food Products Ltd (DFP). Assume further that DFP is a firm that specializes in the importation of farm products from South Africa and Europe. In the course of undertaking your assignment your team has come up with the following data for DFP and its industry. Ratio Long-term debt Inventory Turnover Depreciation/Total Assets Days' sales in receivables Debt to Equity Profit Margin Total Asset Turnover Quick Ratio Current Ratio Times Interest Earned Equity Multiplier 2022 2021 2020 0.45 0.40 0.35 62.65 42.42 32.25 0.25 0.014 0.018 113 98 94 0.75 0.85 0.90 0.082 0.07 0.06 0.54 0.65 0.70 1.028 1.03 1.029 1.33 1.21 1.15 0.9 4.375 4.45 1.75 1.85 1.90 2022 Industry Average 0.35 53.25 0.015 130.25 0.88 0.075 0.40 1.031 1.25 4.65 1.88 Required: (i) In the annual report to the shareholders, the CEO of DFP wrote, “2022 was a good year for the firm with respect to our ability to meet our short-term obligations. We had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short-term marketable securities)." Is the CEO correct? Explain and use only relevant information in your analysis.
