Eavorable business conditions may bring about certain seemingly unfavorable ratios, and unfavorable business operations may result in apparently favorable ratios. For example, Sanchez Company increased its sales and net income sub¬ stantially for the current year, yet the current ratio at the end of the year is lower than at the beginning of the year. Discuss some possible causes of the appar¬ ent weakening of the current position, while sales and net income have in¬ creased substantially.

AppendixLO1