**Answer:**

**a. Current Ratio is 4.33 times**

**b. Acid Test Ratio is 2.49 times **

**c. Debt Equity Ratio is 1.52 times**

**Explanation:**

a. Current Ratio : In this ratio, it shows a relationship between current asset and current liabilities.

So, Current ratio = Current Assets ÷ Current liabilities

where current assets = Cash + Accounts receivable + Inventories + Prepaid insurance

So, current assets = $74,000 + $58,000 + $ 64,000 + $34,000 = $230,000

And, Current liabilities = Accounts payable + Interest payable + notes payable

So, current liabilities = $21,500 + $11,500 + $20,000 = $53,000

Now apply these amounts to above formula

= $230,000 ÷ $53,000

= 4.33 times

Hence, **Current Ratio is 4.33 times**

b. Acid test Ratio : In this ratio, it shows a relationship between quick asset and current liabilities.

So, Acid Test ratio = Quick Assets ÷ Current liabilities

where quick assets = Cash + Accounts receivable

= $74,000 + $58,000

= $132,000

And, Current liabilities = Accounts payable + Interest payable + notes payable

So, current liabilities = $21,500 + $11,500 + $20,000 = $53,000

Now apply these amounts to above formula

= $132,000 ÷ $53,000

= 2.49 times

Hence, **Acid Test Ratio is 2.49 time**s

**c. Debt Equity Ratio :** The debt equity ratio shows a relationship between total debt and total equity of the firm. It helps to calculate the profitability of the company.

Where total debt includes accounts payable, interest payable, notes payable etc and total equity includes common stock, retained earnings, etc.

So, The formula to compute debt equity ratio

= Total debt ÷ Total Equity

where,

Total debt = Accounts payable + interest payable + notes payable

= $21,500 + $11,500 + $200,000

= $233,000

And total Equity = Common stock + retained earnings

= $89,000 + $64,000

= $153,000

**So, debt equity ratio = $233,000 ÷ $153,000
**

** = 1.52 times**