Balance Sheet Analysis The balance sheets of Company A and Company B are presented below:

You have been asked to evaluate the comparative liquidity and leverage positions of the two companies:

a. For the liquidity comparison, compute the working capital, current ratio, and quick ratio for each company. Which company is more liquid?

b. For the leverage comparison, compute the ratio of longterm debt to total assets for each company. Which company is more highly leveraged?

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Company A Balance Sheet Year ended December 31, 2000 Assets: Cash Accounts receivable Inventory Long-term investments Plant and equipment Total Liabilities & Owners' Equity Accounts payable $ 20,000 100,000 200,000 150,000 800,000 $1,270,000 $ 120,000 Short-term notes 60,000 Long-term notes 500,000 Capital stock 500,000 Retained earnings 90,000 Total $1,270,000