Question

W E15-19 (similar to) Question Help Big Time Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2018. To answer this question, you gather the following data: (Click the icon to view the data.) Read the requirements. a. Compute the current ratios for 2018 and 2017. Begin by selecting the formula to compute the current ratio. Current ratio = Total current assets/Total current liabilities i Requirements Now, compute the current ratios for 2018 and 2017. (Round your answers to two decimal places, X.XX.) 2018: 1.54 2.31 2017: Compute the following ratios for 2018 and 2017, 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 b. Compute the cash ratios for 2018 and 2017 Begin by selecting the formula to compute the cash ratlo. Cash ratio (Cash + Cash equivalents) / Total current liabilities Print Now, compute the cash ratios for 2018 and 2017. (Round your answers to two decimal places, X.XX.) Done 2018: L 2017:

Answer 1

(a) Current Ratio = Current Assets / Current Liabilities

2017 = $466,000 / $202,000 = 2.31

2018 = $455,000 / $295,000 = 1.54

(b) Cash Ratio = Cash and Cash Equivalents / Current Liabilities

2017 = $52,000 / $202,000 = 0.2574

2018 = $86,000 / $295,000 = 0.2915 (short term investments are assumed to have maturity of less than 90 days)

(c) Quick Ratio = Quick Assets / Current Liabilities

2017 = $184,000 / $202,000 = 0.91089

2018 = $208,000 / $295,000 = 0.7051

(d) Debt Ratio = Total Liabilities / Total Assets

2017 = $258,000 / $550,000 = 0.4691

2018 = $341,000 / $585,000 = 0.5829

(e) Debt to Equity Ratio = Total Liabilities / Stockholder's Equity

2017 = $258,000 / $292,000 = 0.8836

2018 = $341,000 / $244,000 = 1.3975

The company's ability to pay its current liabilities and total liabilities have deteriorated during 2018.