E13-33B (Learning Objective 5: Analyze the ability to pay liabilities)Evensen Furniture Company has requested that you determine whether the company’s ability to pay its current liabilities and long-term debts improved or deteriorated during 2012. To answer this question, compute the following ratios for 2012 and 2011. (Round your answers to two decimal places.)
a. Working capital
b. Current ratio
c. Quick (acid-test) ratio
d. Debt ratio
e. Times-interest-earned ratio
Summarize the results of your analysis in a written report.
|
2012 2011 |
||
|
Cash ……………………………………. |
$ 40,000 |
$ 50,000 |
|
Short-term investments…………….. |
31,000 |
6,000 |
|
Net receivables ……………………….. |
121,000 |
129,000 |
|
Inventory……………………………….. |
238,000 |
267,000 |
|
Prepaid expenses …………………….. |
15,000 |
5,000 |
|
Total assets…………………………….. |
570,000 |
540,000 |
|
Total current liabilities …………….. |
237,000 |
151,000 |
|
Long-term debt ………………………. |
87,000 |
255,000 |
|
Income from operations …………… |
250,000 |
199,000 |
|
Interest expense………………………. |
40,000 |
40,000 |
