Use Southgate Inc.'s financial statements to compute the acid-test ratio, and indicate whether the change from year to year is favourable or unfavourable. For your analysis, assume that all other things have remained constant. Apply your analysis in very general terms. All values should be accurate to at least two decimal places.

Southgate Inc.Income StatementFor Years Ended December 31, 2014, 2013, and 2012 201420132012Sales$953,700$1,165,100$1,032,600Cost of goods sold448,800445,800404,200Gross profit from sales504,900719,300628,400Operating expenses423,300372,100332,300Income from operations81,600347,200296,100Interest expense6,1005,6006,450Income before taxes75,500341,600289,650Income taxes10,40044,00044,800Net income$65,100$297,600$244,850

Southgate Inc.Balance SheetDecember 31, 2014, 2013, and 2012Assets201420132012Cash$9,100$11,000$12,500Short-term investments91,00079,00067,000Accounts receivable, net40,70034,20042,400Merchandise inventory25,00024,40023,900Prepaid expenses4,2004,9004,200Notes receivable, due in 20175,0004,5005,000Plant assets, net102,000127,000116,000Total assets$277,000$285,000$271,000Liabilities and Equity Accounts payable$20,400$19,800$24,000Salaries payable16,30016,40018,200Income taxes payable32,50029,95027,950Long-term note payable secured by mortgage on plant assets24,00026,00029,000Share capital, 150,000 shares150,000140,000130,000Retained earnings33,80052,85041,850Total liabilities and equity$277,000$285,000$271,000

Ratio20142013AnalysisAcid-test ratio