Mixon Company"s year-end balance sheets show the following:
|
2006
|
2005
|
2004
|
|
Cash
|
$30,800
|
$35,625
|
$36,800
|
|
Accounts receivable, net
|
$88,500
|
$62,500
|
$49,200
|
|
Merchandise inventory
|
111,500
|
82,500
|
53,000
|
|
Prepaid expenses
|
9,700
|
9,375
|
4,000
|
|
Plant assets, net
|
277,500
|
255,000
|
229,500
|
|
Total assets
|
518,000
|
$445,000
|
$372,500
|
|
Accounts payable
|
$128,900
|
$75,250
|
$49,250
|
|
Long-term notes payable secured by mortgages on plant assets
|
$97,500
|
$102,500
|
$82,500
|
|
Common stock, $10 par value
|
162,500
|
162,500
|
162,500
|
|
Retained earnings
|
129,100
|
104,750
|
78,250
|
|
Total liabilities and equity
|
518,000
|
445,000
|
372,500
|
Required:
Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results.