Analyzing the ability to pay liabilities

Analyzing the ability to pay liabilities

Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:

2012              2011

Cash                                                                                                    $ 58,000     $ 57,000

Short-term investments                                                                             31,000             -

Net receivables                                                                                        110,000     132,000

Inventory                                                                                               247,000      297,000

Total assets                                                                                             585,000    535,000

Total current liabilities                                                                               255,000    222,000

Long-term note payable                                                                             46,000       48,000

Income from operations                                                                           180,000     153,000

Interest expense                                                                                       52,000      39,000

Requirement

1. Compute the following ratios for 2012 and 2011:
   1. Current ratio
   2. Acid-test ratio
   3. Debt ratio
   4. Debt to equity ratio