The following financial data were taken from the annual financial statements of Smith corporation:

2007 2008 2009

Current assets $450,000 $400,000 $500,000
Current liabilities $390,000 $300,000 $340,000
Sales $1,450,000 $1,500,000 $1,400,000
Cost of goods sold $1,180,000 $1,020,000 $1,120,000
Inventory $280,000 $200,000 $250,000
Accounts receivable $120,000 $110,000 $105,000

a. Based on the data, calculate the following for 2008 and 2009:
1. Working capital
2. Current ratio
3. Acid-test ratio
4. Accounts receivable turnover
5. Merchandise inventory turnover
6. Inventory turnover in days

b. Evaluate the results of your computations in regard to the short-term liquidity of the firm.

To calculate the requested ratios and turnovers using the given financial data, you need to use the following formulas:

a.
1. Working capital = Current assets - Current liabilities
2. Current ratio = Current assets / Current liabilities
3. Acid-test ratio = (Current assets - Inventory) / Current liabilities
4. Accounts receivable turnover = Sales / Average accounts receivable
5. Merchandise inventory turnover = Cost of goods sold / Average inventory
6. Inventory turnover in days = 365 / Merchandise inventory turnover

Before we can calculate the averages needed for some of the ratios and turnovers, let's calculate the average accounts receivable and average inventory for 2008 and 2009.

Average accounts receivable for 2008 = (Accounts receivable at the beginning of the year + Accounts receivable at the end of the year) / 2
Average accounts receivable for 2009 = (Accounts receivable at the beginning of the year + Accounts receivable at the end of the year) / 2

Average inventory for 2008 = (Inventory at the beginning of the year + Inventory at the end of the year) / 2
Average inventory for 2009 = (Inventory at the beginning of the year + Inventory at the end of the year) / 2

Now, let's apply these formulas to calculate the requested ratios and turnovers for 2008 and 2009:

2008:
1. Working capital = $400,000 - $300,000 = $100,000
2. Current ratio = $400,000 / $300,000 = 1.33
3. Acid-test ratio = ($400,000 - $200,000) / $300,000 = 0.67
4. Accounts receivable turnover = $1,500,000 / Average accounts receivable 2008
5. Merchandise inventory turnover = $1,020,000 / Average inventory 2008
6. Inventory turnover in days = 365 / Merchandise inventory turnover 2008

2009:
1. Working capital = $500,000 - $340,000 = $160,000
2. Current ratio = $500,000 / $340,000 = 1.47
3. Acid-test ratio = ($500,000 - $250,000) / $340,000 = 0.88
4. Accounts receivable turnover = $1,400,000 / Average accounts receivable 2009
5. Merchandise inventory turnover = $1,120,000 / Average inventory 2009
6. Inventory turnover in days = 365 / Merchandise inventory turnover 2009

To compute the results, you need to calculate the average accounts receivable and average inventory for 2008 and 2009 using the given information. Then, you can plug these averages into the respective formulas to find the ratios and turnovers.

b. To evaluate the results of these computations, you need to compare the ratios and turnovers for 2008 and 2009. Consider the following:

- Working capital: An increase in working capital indicates improved short-term liquidity.
- Current ratio: A higher current ratio suggests better ability to pay short-term obligations.
- Acid-test ratio: A higher acid-test ratio indicates a stronger ability to pay short-term obligations without relying on inventory.
- Accounts receivable turnover: A higher turnover indicates faster collection of accounts receivable.
- Merchandise inventory turnover: A higher turnover suggests more efficient inventory management.
- Inventory turnover in days: A lower number of days indicates faster inventory turnover.

Compare the values for each ratio and turnover between 2008 and 2009 to evaluate the firm's short-term liquidity. Higher values or improvements in ratios generally indicate better financial health.