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EXERCISE 13 Evaluating Short-Term Liquidity

Mixon Companys year-end balance sheets show the following:

1-4 Refer to Mixon company's balance sheets in Exercise 1-03. Express the balance sheets in common-size percents. Round to the nearest one-tenth of a percent.

	2006	2005	2004
Cash	$30,800	$35,625	$36,800
Accounts Receivable, Net	88,500	62,500	49,200
Merchandise inventory	111,500	82,500	53,000
Prepaid Expenses	9,700	9,375	4,000
Plant Assets, net	277,500	255,000	229,500
Total Assets	518,000	445,000	372,500
Accounts Payable	128,900	75,250	49,250
Long term notes payable secured by mortgage on plant assets	97,500	102,500	82,500
Common stock $10 par value	162,500	162,500	162,500
Retained earnings	129,100	104,750	78,250
Total liabilities and equity	518,000	445,000	372,500

Required:

Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results.