Question

Financial​ ratios: Liquidity. The financial statements for Tyler​ Toys, Inc. are shown below. Calculate the current​ ratio, quick​ ratio, and cash ratio for Tyler Toys for 2013 and 2014. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders?

Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and 2014
	2014	2013
Revenue	$14,147,831	$13,567,868
Cost of goods sold	$-8,447,482	$-8,132,539
Selling, general, and administrative expenses	$-997,930	$-981,576
Depreciation	$-1,497,678	$-1,472,432
EBIT	$3,204,741	$2,981,321
Interest expense	$-376,256	$-355,741
Taxes	$-1,074,824	$-997,720
Net income	$1,753,661	$1,627,860

                                                                                                           

Tyler Toys, Inc.
Balance Sheet as of December 31, 2013 and 2014
ASSETS	2014	2013	LIABILITIES	2014	2013
Current assets			Current liabilities
Cash	$191,410	$186,794	Accounts payable	$1,545,586	$1,456,639
Investments	$181,864	$120,317	Short-term debt	$311,458	$333,567
Accounts receivable	$668,993	$630,781	Total current liabilities	$1,857,044	$1,790,206
Inventory	$587,295	$563,080	Long-term liabilities
Total current assets	$1,629,562	$1,500,972	Debt	$7,285,650	$6,603,288
Long-term assets			Other liabilities	$1,463,985	$1,346,279
Investments	$3,053,527	$2,828,712	Total liabilities	$10,606,679	$9,739,773
Plant, property, and equipment	$8,497,447	$8,480,786	OWNERS’ EQUITY
Goodwill	$347,183	$346,060	Common stock	$1,457,165	$1,454,769
Intangible assets	$1,158,716	$957,061	Retained earnings	$2,622,591	$2,919,049
			Total owners’ equity	$4,079,756	$4,373,818
			TOTAL LIABILITIES
TOTAL ASSETS	$14,686,435	$14,113,591	AND OWNERS’ EQUITY	$14,686,435	$14,113,591

What is the current ratio for​ 2014? _______ ​(Round to four decimal​ places.)

What is the current ratio for​ 2013? ________ ​(Round to four decimal​ places.)

What is the quick ratio for​ 2014? _________ ​(Round to four decimal​ places.)

What is the quick ratio for​ 2013? ________ ​(Round to four decimal​ places.)

What is the cash ratio for​ 2014? _______ ​(Round to four decimal​ places.)

What is the cash ratio for​ 2013? ________​(Round to four decimal​ places.)

Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders? (Select the best​ response.)

A. The ratios do not look reasonable and the managers of Tyler Toys should make the appropriate adjustments.

B. The ratios look reasonable and the change shows deteriorating liquidity for all ratios.

C. The ratios look reasonable and the change shows improving liquidity for all ratios.

D. The ratios look reasonable and the change shows improving liquidity for all ratios except the cash ratio.

Answer 1

PARTICULARS	2014	2013
A.CURRENT ASSET	16,29,562.00	15,00,972.00
B.CURRENT LIABILITIES	18,57,044.00	17,90,206.00
C.CURRENT RATIO (A/B)	0.8775	0.8384
D.INVENTORY	5,87,295.00	5,63,080.00
E.QUICK ASSET (A-D)	10,42,267.00	9,37,892.00
F.QUICK RATIO (E/B)	0.5613	0.5239
G.CASH & CASH EQUIVALENTS	1,91,410.00	1,86,794.00
I.CASH RATIO (G/B)	0.1031	0.1043

D. The ratios look reasonable and the change shows improving liquidity for all ratios except the cash ratio.