EXERCISE 1–2 Express the following income statement information in common-size percents and assess whether this company’s situation is favorable or unfavorable.

HARBISON CORPORATION Comparative Income Statement For Years Ended December 31, 2006 and 2005 2006 2005 Sales . . . . . . . . . . . . . . . . . $720,000 $535,000 Cost of goods sold . . . . . . . 475,200 280,340 Gross profit . . . . . . . . . . . . . 244,800 254,660 Operating expenses . . . . . . 151,200 103,790 Net income . . . . . . . . . . . . . $ 93,600 $150,870 EXERCISE 1–1 Mixon Company’s year-end balance sheets show the following:
2006 2005 2004 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,800 $ 35,625 $ 36,800 Accounts receivable, net . . . . . . . . . . . . . 88,500 62,500 49,200 Merchandise inventory . . . . . . . . . . . . . . . 111,500 82,500 53,000 Prepaid expenses . . . . . . . . . . . . . . . . . . . 9,700 9,375 4,000 Plant assets, net . . . . . . . . . . . . . . . . . . . 277,500 255,000 229,500 Total assets . . . . . . . . . . . . . . . . . . . . . . . $518,000 $445,000 $372,500 Accounts payable . . . . . . . . . . . . . . . . . . . $128,900 $ 75,250 $ 49,250 Long-term notes payable secured by mortgages on plant assets . . . . . . . 97,500 102,500 82,500 Common stock, $10 par value . . . . . . . . . 162,500 162,500 162,500 Retained earnings . . . . . . . . . . . . . . . . . . 129,100 104,750 78,250 Total liabilities and equity . . . . . . . . . . . . $518,000 $445,000 $372,500 Required:
Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the:

(a) current ratio and

(b) acid-test ratio. Comment on the ratio results.