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for a short-term: based on current ratio, quick ratio long:term: debt to equity ratio, interest coverage ratio. generally, Ratio analysis should be provided for decisions
for a short-term: based on current ratio, quick ratio long:term: debt to equity ratio, interest coverage ratio. generally, Ratio analysis should be provided for decisions
PART C. Comparing balance sheet (7 marks) ABC company and XYZ company conduct the same type of business. Both are recently formed entities. the balance sheets of the two companies as at 30 June 2020 are as follows ABC Company Balance sheet As at 30 June 2020 Assets Current assets Cash at bank 2 400 Accounts receivable 4 800 Total current assets 7 200 Noncurrent Assets Office equipment 6 000 land 18 000 building 30 000 Total non-current assets 54 000 Total assets 61 200 liabilities Current liabilities Accounts payable Loan payable due 30 September 2020 21 600 31 200 Total current liabilities 52 800 Total liabilities 52 800 Net assets 8 400 Owner's equity P. Cable Capital 8 400 Total owners' equity 8 400 XYZ Company Balance sheet As at 30 June 2020 Assets Current assets Cash at bank 2 000 Accounts receivable 24 000 Total current assets 26 000 Noncurrent Assets Office equipment 600 13 600 building 6 000 20 200 Total non-current assets Total assets 46 200 liabilities Current liabilities Accounts payable 4 800 Loan payable due 30 September 2020 7 200 Total current liabilities 12 000 Total liabilities 12 000 Net assets 34 200 Owner's equity P. Cable Capital Total owners' equity 34 200 34 200 You are required to answer the following questions based on the information provided above a. assuming that you are a banker and that the owner of each business has applied for a short-ternm loan of $6000 (repayable in six months), which application would you select as being the more favourable? Explain b. assuming that you are a businessperson interested in buying one or both companies, and botlh owners have indicated their intentions to sell, for which business would you be willing to pay the higher price, assuming you will be taking over the existing liabilities of the company? explain c. if the existing owners agreed to be accountable for all existing liabilities, how would this change your decision in (b), if at allStep by Step Solution
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