Link Back to Chapter 4 (Current Ratio). The comparative financial statements of Grapevine Securities for 20X3, 20X2, and 20X1 include the data shown here:

20X3 (In millions) 20X2 20X1 Balance sheet Current assets: Cash Short-term investments. Receivables, net of allowance for doubtful accounts of $7. S6, and S4, respectively Inventories. Prepaid expenses Total current assets. Total current liabilities. Income statement Sales revenue. Cost of sales. Required 1. Compute these ratios for 20X3 and 20X2:

a. Current ratio

b. Acid-test ratio S 27 $ 26 $ 22 93 101 69 146 154 127 454 383 341 32 31 25 752 695 584 $ 440 S 446 $ 388 $2.671 1.380 $2.505 1,360 $1.944 963

c. Days' sales in receivables 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 sign about the company