Evensen Furniture Company has requested that you determine whether the company

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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.

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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

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