The following information comes from the financial statements of Randall Stewart Company.
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Short-term loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
Randall Stewart has arranged with its bank to refinance its short-term loan when it becomes due in three months. The new loan will have a term of five years.

Instructions:
1. Compute the following ratio values.
(a) Current ratio
(b) Debt-to-equity ratio
(c) Debt ratio
2. If you were the auditor of Randall Stewart’s financial statements, how would you convince yourself of the validity of the refinancing agreement?