Question
Below is selected financial information from the financial statements of company A and company B. Both company A and company B started their business on
Below is selected financial information from the financial statements of company A and company B.Both company A and company B started their business on 1/1/2019.
Company A
Company B
current assets on 12/31/2019
100
8,000
total assets on 12/31/2019
11,000
28,000
current liability on 12/31/2019
200
4,000
total liability on 12/31/2019
4,000
18,000
sales revenue on 12/31/2019
4,500
20,000
Cost of goods sold for year 2019
1,000
16,000
interest expense for year 2019
400
1,000
net income for year 2019
1,500
2,500
a) Which company provides better return on assets?
b) Which company has less liquidity risk in terms of current ratio?
c) Which company has less solvency risk in terms of debt to total assets ratio?
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Financial Statement Analysis
Authors: K. R. Subramanyam, John J. Wild
10th edition
73379433, 73379432, 978-0073379432
