ED-21 Analyzing the ability to pay liabilities

Big Bend Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2016. To answer this question, you gather the following data:

	2016	2015
Cash	$56,000	$51,000
Short-term Investments	$31,000	0
Net Accounts Receivable	$134,000	$136,000
Merchandise Inventory	$257,000	$297,000
Total Assets	$540,000	$550,000
Total Current Liabilities	$285,000	$202,000
Long-term Notes Payable	$46,000	$58,000
Income from Operations	$170,000	$178,000
Interest Expense	$54,000	$45,000

Compute the following ratios for 2016 and 2015, and evaluate the company's ability to pay its current liabilities and total liabilities:

a. Current ratio

b. Cash ratio

c. Acid-test ratio

d. Debt ratio

e. Debt to equity ratio

*hint: d. 2016 0.61

Please list the step-by-step process, thank you!