Question
Big Time Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2024.
Big Time Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during
2024.
To answer this question, you gather the following data:
.
a. Compute the current ratios for
2024
and
2023.
Begin by selecting the formula to compute the current ratio.
| Current ratio | = |
|
Now, compute the current ratios for
2024
and
2023.
(Round your answers to two decimal places, X.XX.)
|
| Current ratio |
|---|---|
| 2024 |
|
| 2023 |
|
b. Compute the cash ratios for
2024
and
2023.
Begin by selecting the formula to compute the cash ratio.
| Cash ratio | = |
|
Now, compute the cash ratios for
2024
and
2023.
(Round your answers to two decimal places, X.XX.)
|
| Cash ratio |
|---|---|
| 2024 |
|
| 2023 |
|
c. Compute the acid-test ratios for
2024
and
2023.
Begin by selecting the formula to compute the acid-test ratio.
| Acid-test ratio | = |
|
Now, compute the acid-test ratios for
2024
and
2023.
(Round your answers to two decimal places, X.XX.)
|
| Acide-test ratio |
|---|---|
| 2024 |
|
| 2023 |
|
d. Compute the debt ratio for
2024
and
2023.
Begin by selecting the formula to compute the debt ratio.
| Debt ratio | = |
|
Now, compute the debt ratios for
2024
and
2023.
(Round your answer to one tenth of a percent, X.X, and do not enter the %. For example, enter 10.1% as 10.1.)
|
| Debt ratio % | |
|---|---|---|
| 2024 |
| % |
| 2023 |
| % |
e. Compute the debt to equity ratios for
2024
and
2023.
Begin by selecting the formula to compute the debt to equity ratio.
| Debt to equity | = |
|
Now, compute the debt to equity ratios for
2024
and
2023.
(Round your answers to two decimal places, X.XX.)
|
| Debt to equity ratio |
|---|---|
| 2024 |
|
| 2023 |
|
Evaluate the company's ability to pay its current liabilities and total liabilities. (Assume the following industry averages for
2024;
current ratio: 0.60, cash ratio: 0.40, acid-test ratio: 0.46, debt ratio: 69%, debt to equity ratio: 2.23.)The current ratio and acid-test ratio are relatively
high
low
, so the company
appears to have
does not have
the liquidity to pay its liabilities. The debt to equity ratio and the debt ratio are
at average levels
extremely low
relatively high
, so the company
is
is not
overloaded with debt.
|
| 2024 | 2023 |
|---|---|---|
| Cash | $60,000 | $53,000 |
| Short-term Investments | 27,000 | 0 |
| Net Accounts Receivables | 110,000 | 134,000 |
| Merchandise Inventory | 267,000 | 282,000 |
| Total Assets | 555,000 | 460,000 |
| Total Current Liabilities | 315,000 | 222,000 |
| Long-term Notes Payable | 36,000 | 58,000 |
| Income from Operations | 155,000 | 188,000 |
| Interest Expense | 42,000 | 37,000 |
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