Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Back to Assignment Attempts 1.6 Keep the Highest 1.6/3 2. Liquidity ratios A liquid asset can be converted quickly to cash with little sacrifice in

image text in transcribed

Back to Assignment Attempts 1.6 Keep the Highest 1.6/3 2. Liquidity ratios A liquid asset can be converted quickly to cash with little sacrifice in its value. Which of the following asset classes is generally considered to be the least liquid? Cash Inventories Accounts receivable The most recent data from the annual balance sheets of Fitcom Corporation and Scramouche Opera Company are as follows: : Fitcom Balance Sheet December 31 (Millions of dollars) Scramouche Opera Fitcom Scramouche Opera Company Corporation Company Liabilities Corporation Assets Current assets Cash $3,157 $2,029 Current liabilities Accounts payable Accruals SO $0 Accounts 1,155 743 696 0 receivable Inventories 3,388 2,178 3,944 3,712 Total current $7,700 $4,950 Notes payable Total current liabilities $4,640 $3,712 assets Net fixed assets 5,672 4,538 Long-term bonds Total debt Net plant and 6,050 6,050 $10,312 $8,250 equipment Common equity Common stock $2,235 $1,788 Retained 1,203 962 $3,438 $2,750 earnings Total common equity Total liabilities Total assets $13,750 $11,000 $13,750 $11,000 and equity and its current ratio is Scramouche Opera Company's quick ratio is and Fitcom Corporation's quick ratio is its current ratio is . Which of the following statements are true? Check all that apply. O Scramouche Opera Company has a better ability to meet its short-term liabilities than Fitcom Corporation. O A current ratio of 1 indicates that the book value of the company's current assets is equal to the book value of its current liabilities. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then a the company depends heavily on the sale of its inventory to meet its short-term obligations. Compared to Fitcom Corporation, Scramouche Opera Company has less liquidity and a lower reliance on outside cash flow to finance its short-term obligations. An increase in the current ratio over time always means that the company's liquidity position is improving

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Art Of Distressed M And A Buying Selling And Financing Troubled And Insolvent Companies

Authors: H. Peter Nesvold, Jeffrey Anapolsky , Alexandra Reed Lajoux

1st Edition

0071750193,0071750304

More Books

Students also viewed these Finance questions