Use the following information for the Exercises below. (Algo)

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[The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 24,990	$ 28,924	$ 29,533
Accounts receivable, net	70,298	51,620	40,181
Merchandise inventory	87,493	67,550	43,657
Prepaid expenses	8,048	7,292	3,248
Plant assets, net	224,421	202,588	187,781
Total assets	$ 415,250	$ 357,974	$ 304,400
Liabilities and Equity
Accounts payable	$ 103,397	$ 61,708	$ 40,181
Long-term notes payable	75,725	84,804	68,618
Common stock, $10 par value	162,500	163,500	162,500
Retained earnings	73,628	47,962	33,101
Total liabilities and equity	$ 415,250	$ 357,974	$ 304,400

For both the current year and one year ago, compute the following ratios:

Exercise 13-7 (Algo) Analyzing liquidity LO P3

(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?

Compute the current ratio for each of the three years.

Current Ratio
	Numerator:	/	Denominator:	=	Current Ratio
	Current assets	/	Current liabilities	=	Current ratio
Current Year:		/		=	0	to 1
1 Year Ago:		/		=	0	to 1
2 Years Ago:		/		=	0	to 1

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

Acid-test ratio
	Numerator:					/	Denominator:	=	Acid-Test Ratio
	Cash	+	Short-term investments	+	Current receivables	/	Current liabilities	=	Acid-test ratio
Current Year:		+		+		/		=	0	to 1
1 Year Ago:		+		+		/		=	0	to 1
2 Years Ago:		+		+		/		=	0	to 1