Exercise 13-7 Analyzing liquidity LO P3

Simon Companys year-end balance sheets follow.

At December 31	Current Yr				1 Yr Ago			2 Yrs Ago
Assets
Cash		$	36,582		$	41,922		$	44,106
Accounts receivable, net			103,946			74,831			59,390
Merchandise inventory			134,613			97,914			63,889
Prepaid expenses			11,781			11,115			4,755
Plant assets, net			320,949			298,245			268,960
Total assets		$	607,871		$	524,027		$	441,100
Liabilities and Equity
Accounts payable		$	149,846		$	90,332		$	58,225
Long-term notes payable secured by mortgages on plant assets			115,423			120,526			96,508
Common stock, $10 par value			162,500			162,500			162,500
Retained earnings			180,102			150,669			123,867
Total liabilities and equity		$	607,871		$	524,027		$	441,100

(1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three year period?

Complete this question by entering your answers in the tabs below.

• Required 1A
• Required 1B
• Required 2A
• Required 2B

Compute the current ratio for each of the three years.

Current Ratio
	Choose Numerator:	/	Choose Denominator:	=	Current Ratio
		/		=	Current ratio
Current Yr:		/		=		to 1
1 Yr Ago:		/		=		to 1
2 Yrs Ago:		/		=		to 1

• Required 1A
• Required 1B
• Required 2A
• Required 2B

• Did the current ratio improve or worsen over the three year period?

  Current ratio

• Compute the acid-test ratio for each of the three years.

  Acid-test ratio
  	Choose Numerator:					/	Choose Denominator:	=	Acid-Test Ratio
  		+		+		/		=	Acid-test ratio
  Current Yr:		+		+		/		=		to 1
  1 Yr Ago:		+		+		/		=		to 1
  2 Yrs Ago:		+		+		/		=		to 1