## Question

###### 2018 2017 Cash Short-term Investments Net Accounts Receivables Merchandise Inventory Total Assets 60,000 $ 53,000 30,000...

2018 2017 Cash Short-term Investments Net Accounts Receivables Merchandise Inventory Total Assets 60,000 $ 53,000 30,000 0 146,000 132,000 277,000 252,000 495,000 535,000 265,000 202,000 44,000 56,000 170,000 178,000 48,000 44,000 Total Current Liabilities Long-term Note Payable Income from Operations Interest Expense

Compute the following ratios for 2018 and 2017, and evaluate the company's ability to pay its current liabilities and total liabilities: a. Current ratio d. Debt ratio b. Cash ratio e. Debt to equity ratio c. Acid-test ratio

## Answers

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Statement of Financial PositionAssets20182017Cash 60,000.00 53,000.00 Short term investments 30,000.00 - Net Accounts Receivable 146,000.00 132,000.00 Merchandise Inventory 277,000.00 252,000.00 Total Current Assets513,000.00437,000.00Total Assets495,000.00535,000.00Liabilities & Stockholders' EquityLiabilities20182017Current Liabilities 265,000.00 202,000.00 Long Term Liabilities 44,000.00 56,000.00 Total Liabilities309,000.00258,000.00Stockholders' Equity 186,000.00 277,000.00 This is total assets less total liabilities Total Liabilities & Stockholders' Equity495,000.00535,000.00Quick Assets20182017Cash 60,000.00 53,000.00 Short term investments 30,000.00 - Accounts Receivable 146,000.00 132,000.00 Total Quick Assets236,000.00185,000.00Cash Assets20182017Cash 60,000.00 53,000.00 Short term investments 30,000.00 - Total Cash Assets90,000.0053,000.00

Final Answer20182017CommentsCurrent RatioCurrent Assets/Current Liabilities 1.94 2.16 Current Ratio has decreased. It means company's ability to pay off its current liabilities has decreased. Cash RatioCash Assets/Current Liabilities 0.34 0.26 Cash Ratio has increased. It means company's ability to maintain cash assets to pay off its current liabilities has increased. Quick RatioQuick Assets/Current Liabilities 0.89 0.92 Quick Ratio has decreased. It means company's ability to pay off its current liabilities has decreased. Debt RatioTotal Liabilities/ Total Assets 0.62 0.48 Debt Ratio has increased. It means company's assets has reduced in proportion to its debt which may hamper its ability to pay off its total liabilities in future. Debt to Equity RatioTotal Liabilities/ Total Equity 1.66 0.93 Debt to equity ratio has increased. It means company's equity has reduced in proportion to its debt which may hamper its ability to pay off its total liabilities in future.

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