Big Beautiful Photo Shop has asked you to determine whether the companys ability to pay current liabilities
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Question:
Big Beautiful Photo Shop has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2018. To answer this question, you gather the following data:
| 2018 | 2017 |
---|---|---|
Cash | $ 58,000 | $ 47,000 |
Short-term Investments | 34,000 | 0 |
Net Accounts Receivable | 140,000 | 124,000 |
Merchandise Inventory | 217,000 | 272,000 |
Total Assets | 530,000 | 565,000 |
Total Current Liabilities | 288,000 | 205,000 |
Long-term Notes Payable | 40,000 | 50,000 |
Income from Operations | 165,000 | 158,000 |
Interest Expense | 55,000 | 41,000 |
Compute the following ratios for 2018 and 2017, and evaluate the company’s ability to pay its current liabilities and total liabilities:
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Current ratio
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Cash ratio
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Acid-test ratio
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Debt ratio
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Debt to equity ratio
Related Book For
Horngrens Financial and Managerial Accounting The Financial Chapters
ISBN: 978-0134486857
6th edition
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
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