1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable? Compute the (a) current ratio and (b) acid-test ratio.
1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable? Compute the (a) current ratio and (b) acid-test ratio.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Simon Company's year-end balance sheets follow.
At December 31 Current Year 1 Year Ago 2 Years Ago
Assets
Cash $ 29,484 $ 34,808 $ 35,907
Accounts receivable , net 84,598 59,105 49,830
Merchandise inventory 104,217 80,494 51,503
Prepaid expenses 9,590 8,775 4,071
Plant assets, net 271,834 247,614 228,789
Total assets $ 499,723 $ 430,796 $ 370,100
Liabilities and Equity
Accounts payable $ 124,431 $ 73,533 $ 50,319
Long-term notes payable 94,887 100,074 81,792
Common stock, $10 par value 162,500 162,500 162,500
Retained earnings 117,905 94,689 75,489
Total liabilities and equity $ 499,723 $ 430,796 $ 370,100
For both the current year and one year ago, compute the following ratios:
1. Express the balance sheets in common-size percents.
2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable?
3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable?
Compute the (a) current ratio and (b) acid-test ratio.
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