51200 103790 93500 150870 Operating expenses Tlet income Mix

51200 103,790 93,500 $150,870 Operating expenses Tlet income Mixon Company\'s year-end balance sheets show the following 2006 2005 2004 3000 $ 35,625 36,300 88,500 62,500 49200 111,500 2,500 53,000 9,375 4,000 277,500 255,000 229,500 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net .. Total assets 9,700 $518,000 $445,000 $372,500 Accounts payable Long-term notes payable secured $128,900 $75,250 $49,250 Common stock, $10 par value Retained earnings Total liabilities and equity by mortgages on plant assets97,500 102,500 82,500 162,500 162,500 162,500 129,100 104,750 78,250 $518,000 $445,000 $372,500 Required Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results Reier to Mixon Company\'s balance sheets in Exercise 1-3. Express the balance sheets in common-size percents. Round to the nearest one-tenth of a percent.

Solution

Current ratio Current assets/current liabilities 2004 = (36800+49200+53000+4000)/(49250) 2.9 2005 = (35625+62500+82500+9375)/75250 = 2.5 2006 = (30800+88500+111500+9700)/128900 1.9 Acid test ratio Current assets except inventory/current liabilities 2004 = (36800+49200+4000)/(49250) 1.8 2005 = (35625+62500+9375)/75250 = 1.4 2006 = (30800+88500+9700)/128900 1.0