ED-21
Analyzing the ability to pay liabilities
ED-21
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
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
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
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 d. Debt ratio
b. Cash ratio e. Debt to equity ratio
c. Acid-test ratio
Long-term Note Payable 46,000 48,000
Income From Operations 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 d. Debt ratio
b. Cash ratio e. Debt to equity ratio
c. Acid-test ratio
TUTORIAL PREVIEW
Req. 1
a.
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Current Ratio = Current Assets/ Current
Liabilities
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2015
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2014
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Cash
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58000
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57000
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Short-term investments
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31000
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0
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Net receivables
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110000
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132000
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File name: ED-21 Large Land Photo.xlsx File type: .doc PRICE: $10
