Comparative statement data for Smyth Company and James Company, two competitors, are presented below. All balance sheet

Question:

Comparative statement data for Smyth Company and James Company, two competitors, are presented below. All balance sheet data are as of December 31, 2010.

Instructions
(a) Comment on the relative profitability of the companies by computing the net income and earnings per share for each company for 2010.
(b) Comment on the relative liquidity of the companies by computing working capital and the current ratios for each company for 2010.
(c) Comment on the relative solvency of the companies by computing the debt to total assets ratio and the free cash flow for each company for2010.

Solvency
Solvency means the ability of a business to fulfill its non-current financial liabilities. Often you have heard that the company X went insolvent, this means that the company X is no longer able to settle its noncurrent financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...