Exercise 137 Liquidity analysis LO P3 Simon Companys yearend

Exercise 13-7 Liquidity analysis LO P3 Simon Company\'s year-end balance sheets follow. At December 31 2015 2014 2013 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net s 34,475 40,298 40,331 98,930 67,729 55,404 123,141 92,267 59,602 10,772 10,5784,39 311,218 287,866 251,772 Total assets $578,536 $498,738 $ 411,500 Liabilities and Equity Accounts payable $144,055 $ 84,287 54,318 Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings 09,852 111,26890,942 62,500 162,500 162,500 162,129 140,683 103,740 Total liabilities and equity $578,536 $498,738 $411,500 (1)Compute the current ratio for the year ended 2015, 2014, and 2013. Current Ratio Choose Denominator: Choose Numerator: Current Ratio 2015: 2014 2013 Current ratio to 1 to 1 to 1

Solution

Numerator / Denominator = Current Ratio Current Assets: 2015 2014 2013 Current Assets / Current Liabilities = Current Ratio Total Assets 578536 498738 411500 2015 267318 / 144055 = 1.86 Less: Plant Assets, Net 311218 287866 251772 2014 210872 / 84287 = 2.50 Total Current Assets 267318 210872 159728 2013 159728 / 54318 = 2.94 Current Liabilities: 2015 2014 2013 Account Payable 144055 84287 54318 Total Current Liabilities 144055 84287 54318 Numerator / Denominator = Acid Test Ratio Cash + AR, Net + ST Investment / Current Liabilities = Acid Test Ratio 2015 34475 + 98930 + 0 / 144055 = 0.93 2014 40298 + 67729 + 0 / 84287 = 1.28 2013 40331 + 55404 + 0 / 54318 = 1.76