Smith and Sons, Inc. Income Statement
(in millions)	2016	2015
Net sales	$10,150	$9,650
Cost of goods sold	(5,500)	(5,200)
Gross profit	4,650	4,450
Selling and administrative expenses	(2,800)	(2,700)
Income from operations	1,850	1,750
Interest expense	(300)	(250)
Income before income taxes	1,550	1,500
Income tax expense	(420)	(400)
Net income	1,130	1,100

Smith and Sons, Inc. Balance Sheet
(in millions)	2016	2015
Assets
Current assets
Cash and cash equivalents	300	500
Accounts receivable	900	800
Inventory	600	750
Other current assets	400	250
Total current assets	2,200	2,300
Property, plant & equipment, net	2,500	2,400
Other assets	5,700	5,900
Total Assets	10,400	10,600
Liabilities and Stockholders' Equity
Current liabilities	3,100	3,000
Long-term liabilities	5,000	5,400
Total liabilities	8,100	8,400
Stockholders' equity-common	2,300	2,200
Total Liabilities and Stockholders' Equity	10,400	10,600

Calculate the current ratio for Smith & Sons, Inc., for 2015 and 2016. Round answers to two decimal places.

2015	Answer
2016	Answer

Did the companys ability to pay its current liabilities improve over the two years?

The decrease in ratio indicates that Smith & Son's ability to pay its current liabilities improved.

The increase in ratio indicates that Smith & Son's ability to pay its current liabilities declined.

The decrease in ratio indicates that Smith & Son's ability to pay its current liabilities declined.

The increase in ratio indicates that Smith & Son's ability to pay its current liabilities improved.