Question

Simon Company's year-end balance sheets follow.

Answer 1

Answer:

1) current ratio = current assets / current liabilities

current assets include cash + accounts receivable + prepaid expenses + inventory

current liabilities include liabilities and equity amounts payable

• current ratio 2015 = ($34,254 + $45,211 + $49,629 + $3,960) / $47,057 = 2.83
• current ratio 2016 = ($32,545 + $58,094 + $76,014 + $8,629) / $67,377 = 2.60
• current ratio 2017 = ($27,286 + $79,083 + $98,417 + $9,056) / $119,855 = 1.78

2) acid test ratio = (current assets - inventory) / current liabilities

• acid test ratio 2015 = ($34,254 + $45,211 + $3,960) / $47,057 = 1.77
• acid test ratio 2016 = ($32,545 + $58,094 + $8,629) / $67,377 = 1.47
• acid test ratio 2017 = ($27,286 + $79,083 + $9,056) / $119,855 = 0.96