Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Current Year $ 25,693 75,195 91,790 7,868 226,383 $ 426,929 1 Year Ago $ 106,305 81,065 162,500 77,059 $426,929 $ 30,032 51,526 68,088 7,729 210,667 $368,042 Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity For both the current year and one year ago, compute the following ratios: 2 Years Ago $ 60,955 86,343 163,500 57,244 $368,042 $ 31,284 40,485 44,871 3,408 189,752 $ 309,800 $ 40,894 66,412 163,500 38,994 $ 309,800

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Exercise 17-7 (Algo) Analyzing liquidity LO P3
(1-a) Compute the current ratio for each of the three years.
(1-b) Did the current ratio improve or worsen over the three-year period?
(2-a) Compute the acid-test ratio for each of the three years.
(2-b) Did the acid-test ratio improve or worsen over the three-year period?
Complete this question by entering your answers in the tabs below.
Required 1A Required 1B Required 2A Required 2B
Compute the current ratio for each of the three years.
Current Year:
1 Year Ago:
2 Years Ago:
Numerator:
1
1
1
1
1
Current Ratio
Denominator:
< Required 1A
=
II
=
II
Current Ratio
Current ratio
to 1
to 1
to 1
Required 1B >
Transcribed Image Text:Exercise 17-7 (Algo) Analyzing liquidity LO P3 (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Compute the current ratio for each of the three years. Current Year: 1 Year Ago: 2 Years Ago: Numerator: 1 1 1 1 1 Current Ratio Denominator: < Required 1A = II = II Current Ratio Current ratio to 1 to 1 to 1 Required 1B >
Required information
Use the following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Simon Company's year-end balance sheets follow.
At December 31
Assets
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
Liabilities and Equity
Accounts payable
Long-term notes payable
Common stock, $10 par value
Retained earnings
Total liabilities and equity.
Current Year
$ 25,693
75,195
91,790
7,868
226,383
$426,929
1 Year Ago
$ 30,032
51,526
68,088
7,729
210,667
$ 368,042
2 Years Ago
$ 60,955
86,343
$ 106,305
81,065
162,500
$ 40,894
66,412
163,500
163,500
57,244
77,059
38,994
$ 426,929 $ 368,042 $ 309,800
$ 31,284
40,485
44,871
3,408
189,752
$ 309,800
For both the current year and one year ago, compute the following ratios:
Transcribed Image Text:Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity. Current Year $ 25,693 75,195 91,790 7,868 226,383 $426,929 1 Year Ago $ 30,032 51,526 68,088 7,729 210,667 $ 368,042 2 Years Ago $ 60,955 86,343 $ 106,305 81,065 162,500 $ 40,894 66,412 163,500 163,500 57,244 77,059 38,994 $ 426,929 $ 368,042 $ 309,800 $ 31,284 40,485 44,871 3,408 189,752 $ 309,800 For both the current year and one year ago, compute the following ratios:
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I need this format for the second required, thank you

### Financial Ratio Analysis: Current and Acid-Test Ratios

#### Objective:
This section focuses on computing and analyzing two important financial ratios over a three-year period:
1. **Current Ratio**
2. **Acid-Test Ratio**

#### Tasks:
1. **Current Ratio**
   - **1-a:** Compute the current ratio for each of the three years.
   - **1-b:** Analyze whether the current ratio improved or worsened over the three-year period.

2. **Acid-Test Ratio**
   - **2-a:** Compute the acid-test ratio for each of the three years.
   - **2-b:** Analyze whether the acid-test ratio improved or worsened over the three-year period.

#### Instructions:
Use the interactive tabs to enter your computations.

### Detailed Explanation of the Acid-Test Ratio Calculation

The **Acid-Test Ratio**, also known as the quick ratio, measures a company’s ability to meet its short-term obligations using its most liquid assets.

#### Formula:
\[ \text{Acid-Test Ratio} = \frac{\text{Current Assets} + \text{Short-term Investments}}{\text{Denominator}} \]

##### Components:
- **Numerator:** Sum of Current Assets and Short-term Investments.
- **Denominator:** Usually refers to current liabilities, not specified in the image.

##### Computation Table:
- **Current Year:** Input data for current assets and short-term investments to calculate the ratio.
- **1 Year Ago:** Input data for the previous year.
- **2 Years Ago:** Input data for two years prior.

Each computed value will form an Acid-Test Ratio expressed as:
\[ X \text{ to } 1 \]

Use this table to track the liquidity changes over the three years. To input your calculations, click on the relevant tab (e.g., Required 2A). After completing your data entry, proceed to analyze the trends by answering the next sections.

Keep this information in mind as you evaluate the financial health of your organization through these ratios.
Transcribed Image Text:### Financial Ratio Analysis: Current and Acid-Test Ratios #### Objective: This section focuses on computing and analyzing two important financial ratios over a three-year period: 1. **Current Ratio** 2. **Acid-Test Ratio** #### Tasks: 1. **Current Ratio** - **1-a:** Compute the current ratio for each of the three years. - **1-b:** Analyze whether the current ratio improved or worsened over the three-year period. 2. **Acid-Test Ratio** - **2-a:** Compute the acid-test ratio for each of the three years. - **2-b:** Analyze whether the acid-test ratio improved or worsened over the three-year period. #### Instructions: Use the interactive tabs to enter your computations. ### Detailed Explanation of the Acid-Test Ratio Calculation The **Acid-Test Ratio**, also known as the quick ratio, measures a company’s ability to meet its short-term obligations using its most liquid assets. #### Formula: \[ \text{Acid-Test Ratio} = \frac{\text{Current Assets} + \text{Short-term Investments}}{\text{Denominator}} \] ##### Components: - **Numerator:** Sum of Current Assets and Short-term Investments. - **Denominator:** Usually refers to current liabilities, not specified in the image. ##### Computation Table: - **Current Year:** Input data for current assets and short-term investments to calculate the ratio. - **1 Year Ago:** Input data for the previous year. - **2 Years Ago:** Input data for two years prior. Each computed value will form an Acid-Test Ratio expressed as: \[ X \text{ to } 1 \] Use this table to track the liquidity changes over the three years. To input your calculations, click on the relevant tab (e.g., Required 2A). After completing your data entry, proceed to analyze the trends by answering the next sections. Keep this information in mind as you evaluate the financial health of your organization through these ratios.
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