Question

The balance sheet at December 31, 2018, 2019, and 2020, and income statement for the years ended December 31, 2018, 2019, and 2020, for Apache Inc. include the following data: (Click icon to view the balance sheet.) (Click icon to view the income statement.) Requirements Use the years of data to answer the following: 1. Calculate the current ratio for 2018, 2019, and 2020. 2. Calculate the debt ratio for 2018, 2019, and 2020. 3. Evaluate each ratio and determine if the ratio has improved or deteriorated over the three years. Explain what the changes mean. 2018 Requirements 1 & 2. Calculate the current ratio and the debt ratio for 2018, 2019, and 2020 (Use a calculator that allows you six decimals. Round all ratios to three decimals.) 2020 2019 1. Current ratio 2. Debt ratio Requirement 3. Evaluate each ratio and determine if the ratio has improved or deteriorated over the three years. Explain what the changes mean. The current ratio has over the 3 years (some deterioration in 2019 was reversed in 2020). This means that Apache Inc. had cash to pay its accounts payable and salaries payable every year. In 2020, the current ratio is and indicates that Apache can pay its debts. Complete the sentences below. (Round the percent to the nearest whole number.) The debt ratio has over the 3 years. In 2018, Apache financed 100% of its assets with debt, at December 31, 2020, only % of the assets were financed. This ratio is still if the company needs to borrow in order to finance more equipment or expand their office space

Answer 1

Requirement 1:

Current ratio

Current ratio = Current Assets / Current Liabilities

Current ratio	2020	2019	2018
Current ratio	$11.4 / 6.9 = 1.652 : 1	$6.4 / $5.9 = 1.085 : 1	$4.4 / $3.9 = 1.128 : 1

Requirement 2:

Debt ratio

Debt ratio = Total Liabilities / Total Assets * 100

Debt ratio	2020	2019	2018
Debt ratio	$16.1 / $27.6 * 100 = 58.333%	$11.1 / $16.1 * 100 = 68.944%	$7.6 / $7.6 * 100 = 100%

Requirement 3:

The current ratio has improved over the 3 years (some deterioration in 2019 was reversed in 2020). This means that Apache Inc. had sufficient cash to pay its accounts payable and salaries payable every year. In 2020, the current ratio is very good and indicates that Apache can pay its debts.

The debt ratio has improved over the 3 years. In 2018, Apache financed 100% of its assets with debt, at December 31, 2020 only 58.333% of the assets were financed. This ratio is still high if the company needs to borrow in order to finance more equipment or expand their office space.

All the best...