Link Back to Chapter 4 (Current Ratio). The comparative financial statements of American Dataset. for 20X3, 20X2, and 20X1 include the following selected data: Balance sheet Current assets: Cash Short-term investments. Receivables, net of allowance for doubtful accounts of $6. $6, and $5, respectively Inventories... Prepaid expenses. Total current assets Total current liabilities. Income statement Sales revenue Cost of sales. (In millions) 20X3 20X2 20X1 $ $ 80 $ 60 140 174 122 257 265 218 429 341 302 27 46 929 887 748 $ 503 $ 528 $ 413 $5,189 $4,995 $4,206 2,734 2,636 2,418 Required

c. Days' sales in receivables 1. Compute these ratios for 20X3 and 20X2:

a. Current ratio

b. Acid-test ratio 2. Write a memo explaining to top management which ratios improved from 20X2 to 20X3 and which ratios deteriorated. Which item in the financial statements caused some ratios to improve and others to deteriorate? Discuss whether this factor conveys a favorable or an unfavorable impression about American Dataset.