Large Land Photo Shop has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2015.
To answer this question, you gather the following data:
2015 2014
Cash
58,000 57,000
Short-term Investments
$31,000 0
Net Accounts Receivables
110,000 132,000
Merchandise Inventory
247,000 297,000
Total Assets
585,000 535,000
Total Current Liabilities
255,000 222,000
Long-term Note Payable
46,000 48,000
Income From Operations 180,000 153,000
180,000 153,000
Interest Expense
52,000 39,000
Compute the following ratios for 2015 and 2014, and evaluate the company’s ability to pay its current liabilities and total liabilities:
a. Current ratio
b. Cash Ratio
c. Acid-test ratio
d. Debt ratio 2015 0.51
e. Debt to equity ratio