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Firms A and B are comparable competitors (IE: they are comps of each other). A has a working capital ratio of 1.4 and B has
Firms A and B are comparable competitors (IE: they are "comps" of each other). A has a working capital ratio of 1.4 and B has a working capital ratio of 0.8. Is one of the companies financially unsafe? Choose one of the Yes/No answers, and provide one reason for your choice. Yes, A is unsafe. The unsafe firm has fewer Current Assets than Current Liabilities. The unsafe firm has fewer Working Capital Assets than Current Liabilities The unsafe firm has fewer Working Capital Assets than Working Capital Liabilities. Yes, B is unsafe. No, both are safe. Both ratios are well above zero. Please refer to the Working Capital discussion in Handout Ch06A, part 5. Consider what it means for WCR to be smaller/greater than 1
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