Big Bend Picture Frames has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2007. To answer this question, compute these ratios for 2007 and 2006:

a. Current ratio

b. Acid-test ratio 

c. Debt ratio

d. Times-interest-earned ratio 

Summarize the results of your analysis in a written report.

Transcribed Image Text:

2007 2006 Cash............. Short-term investments. Net receivables....... Inventory.... $ 61,000 $ 47,000 28,000 122,000 116,000 237,000 272,000 Total assets. 560,000 490,000 Total current liabilities......... 275,000 202,000 Long-term note payable....... 40,000 52,000 Income from operations. 165,000 158,000 Interest expense..... 48,000 39,000