Question
A liquid asset can be converted to cash quickly without significantly impacting the assets value. Question #1 Which of the following asset classes is generally
A liquid asset can be converted to cash quickly without significantly impacting the assets value.
Question #1 Which of the following asset classes is generally considered to be the most liquid?
A. Cash B. Inventories C. Accounts receivable
The most recent data from the annual balance sheets of N&B Equipment Company and Scramouche Opera Company are as follows:
Balance Sheet December 31stst(Millions of dollars)
Scramouche Opera Company | N&B Equipment Company | Scramouche Opera Company | N&B Equipment Company | ||
---|---|---|---|---|---|
Assets | Liabilities | ||||
Current assets | Current liabilities | ||||
Cash | $861 | $553 | Accounts payable | $0 | $0 |
Accounts receivable | 315 | 203 | Accruals | 190 | 0 |
Inventories | 924 | 594 | Notes payable | 1,075 | 1,012 |
Total current assets | 2,100 | 1,350 | Total current liabilities | 1,265 | 1,012 |
Net fixed assets | Long-term bonds | 1,547 | 1,238 | ||
Net plant and equipment | 1,650 | 1,650 | Total debt | 2,812 | 2,250 |
Common equity | |||||
Common stock | 610 | 488 | |||
Retained earnings | 328 | 262 | |||
Total common equity | 938 | 750 | |||
Total assets | 3,750 | 3,000 | Total liabilities and equity | 3,750 | 3,000 |
Question #2 N&B Equipment Companys quick ratio is A.) 0.8964 B.) 1.1205 C.) 0.9296 D.) 0.7470 and its current ratio is A.) 1.8340 B.) 2.8340 C.) 2.5340 D.) 1.3340 ; Scramouche Opera Companys quick ratio is A.) 0.7470 B.) 1.3944 C.) 0.9296 D.) 1.1155 , and its current ratio is A.) 2.8601 B.) 2.1601 C.) 1.6601 D.) 3.1601
Question #3 Which of the following statements are true? Check all that apply.
A. N&B Equipment Company has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Scramouche Opera Company. B. A current ratio of 1 indicates that the book value of the companys current assets is equal to the book value of its current liabilities. C. An increase in the quick ratio over time usually means that the companys liquidity position is improving and that the company is managing its short-term assets well. D. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company E. An increase in the current ratio over time always means that the companys liquidity position is improving.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started