The comparative financial statements of Orvis Catalog Merchants for 19X4, 19X3, and \(19 \mathrm{X} 2\) included the following selected data:

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1. For 19X4 and 19X3 compute these ratios:

a. Current ratio

b. Acid-test ratio

c. Inventory turnover

d. Days' sales in average receivables 2. Explain for top management which ratio values showed improvement from 19X3 to 19X4 and which ratio values showed deterioration. Which item in the financial statements caused some ratio values to improve and others to deteriorate?

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Balance sheet: Current assets: Cash..... Short-term investments... Receivables, net of allowance for doubtful Millions 19X4 19X3 19X2 $ 27 27 S 26 S 22 73 101 69 accounts of $7, $6, and $4 136 Inventories.. 438 Prepaid expenses... 42 154 127 341 31 25 Total current assets. Total current liabilities. Income statement: 716 695 584 440 446 388 Sales revenue. $2.671 $2,505 $1,944 Cost of sales........ 1,380 1,360 963