7) The following information is from Carter Corp.’s year-endfinancial statements.:
| Cash | $150 |
| Accounts Receivable | $175 |
| Short-Term Investments | $300 |
| Prepaid Expenses | $75 |
| Land | $1,000 |
| Equipment | $950 |
| Accumulated Depreciation | $625 |
| Accounts Payable | $275 |
| Salaries Payable | $25 |
| Interest Payable | $100 |
| Long-Term Notes Payable | $300 |
| Long-Term Loans Payable | $400 |
| Total Revenues | $2,500 |
a) Calculate Carter’s current ratio, quick (acid test) ratio,and days’ sales ratio for the year. (Last year Carter’s accountsreceivables were $225.)
b) Last year, Carter’s current ratio was 2, Carter’s quick ratiowas 1.4, and Carter’s days’ sales ratio was 31 days. Comment onwhether these ratios have improved or worsened this year.
