Question

Simon Company’s year-end balance sheets follow.

At December 31	Current Yr				1 Yr Ago			2 Yrs Ago
Assets
Cash		$	24,733		$	29,206		$	31,031
Accounts receivable, net			72,416			52,143			39,752
Merchandise inventory			91,049			68,221			42,764
Prepaid expenses			8,046			7,667			3,346
Plant assets, net			231,518			211,523			190,407
Total assets		$	427,762		$	368,760		$	307,300
Liabilities and Equity
Accounts payable		$	105,448		$	62,944		$	40,564
Long-term notes payable secured by mortgages on plant assets			78,007			86,511			69,272
Common stock, $10 par value			162,500			162,500			162,500
Retained earnings			81,807			56,805			34,964
Total liabilities and equity		$	427,762		$	368,760		$	307,300

(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?

Answer 1