Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1-a. Calculate the current ratio for the past two years. (Round your answers to 2 decimal places.) 1-b. Did the current ratio improve or weaken in the more recent year? Improve Weaken 2-a. Calculate the acid-test (quick) ratio for the past two years. (Round your answers to 2 decimal places.) 2-b. Did the acid-test ratio improve or weaken in the more recent year? Improve Weaken 3. If American Eagle used $100 million in cash to pay $100 million in accounts payable, how would its current ratio and acid-test ratio change? (Round your answers to 2 decimal places.)

Find the appendix attached:

Current ratio improved in 2018 from 1.83 in 2017 to 2.00 in 2018

Acid test ratio improved in 2018 from 1.10 in 2017 to 1.18 in 2018

The payment of $100 million accounts payable  would make  current ratio in 2017 improve from 1.83 to 2.03 and in 2018 from 2.00 to 2.25

The payment of $100 million accounts payable  would make  acid test ratio in 2017 from 1.10  to 1.12 and in 2018 from 1.18 to 1.22

Find computations below.

Explanation:

                                                                                2018                2017

Current ratio

Current assets/current liabilities

$968,530/$485,221                                               2.00

$901,229/$493,783                                                                       1.83

Current ratio improved in 2018 from 1.83 in 2017 to 2.00 in 2018

                                                                            2018                2017

Acid test ratio

(Current assets-inventory)/current liabilities

($968,530-$398,213)/$485,221                        1.18                                          

($901,229-$358,446)/$493,783                                                 1.10

Acid test ratio improved in 2018 from 1.10 in 2017 to 1.18 in 2018

Impact of $100,000,000 cash used in settling accounts payable:

                                                                              2018                2017

Current ratio

Current assets/current liabilities

($968,530-$100,000)/($485,221-$100,000)      2.25                                          

($901,229-$100,000)/$493,783-($100,000)                          2.03                                                            

The payment of $100 million accounts payable  would make  current ratio in 2017 from 1.83 to 2.03 and in 2018 from 2.00 to 2.25

                                                                                          2018                2017

Acid test ratio

(Current assets-inventory)/current liabilities

($968,530-$398,213-$100,000)/($485,221-$100,000)    1.22                                                            

($901,229-$358,446-$100,000)/($493,783-$100,000)                    1.12    

The payment of $100 million accounts payable  would make  acid test ratio in 2017 from 1.10  to 1.12 and in 2018 from 1.18 to 1.22

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