Question

Simon Company’s year-end balance sheets follow.

At December 31	2017			2016			2015
Assets
Cash	$	31,508		$	36,830		$	39,140
Accounts receivable, net		95,979			65,768			50,140
Merchandise inventory		115,989			87,777			54,489
Prepaid expenses		10,147			9,865			4,221
Plant assets, net		291,311			269,531			239,610
Total assets	$	544,934		$	469,771		$	387,600
Liabilities and Equity
Accounts payable	$	134,332		$	80,979		$	52,186
Long-term notes payable secured by mortgages on plant assets		100,399			108,047			85,660
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		147,703			118,245			87,254
Total liabilities and equity	$	544,934		$	469,771		$	387,600

1. Compute the current ratio for the year ended 2017, 2016, and 2015.
2. Compute the acid-test ratio for the year ended 2017, 2016, and 2015.

Answer 1

1
Current Ratio
	Choose Numerator:	/	Choose Denominator:	=	Current Ratio
	Current assets	/	Current liabilities	=	Current ratio
2017	$253,623	/	$134,332	=	1.89	to 1
2016	$200,240	/	$80,979	=	2.47	to 1
2015	$147,990	/	$52,186	=	2.84	to 1
2
Acid-Test Ratio
	Choose Numerator:					/	Choose Denominator:	=	Acid-Test Ratio
	Cash	+	Short-term investments	+	Current receivables	/	Current liabilities	=	Acid-test ratio
2017	$31,508	+	0	+	$95,979	/	$134,332	=	0.95	to 1
2016	$36,830	+	0	+	$65,768	/	$80,979	=	1.27	to 1
2015	$39,140	+	0	+	$50,140	/	$52,186	=	1.71	to 1