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I need help with this. Please provide an explanation not just an answer ! Most firms borrow money to finance some of their assets, and
I need help with this. Please provide an explanation not just an answer !
Most firms borrow money to finance some of their assets, and most will choose to borrow some long-term funds and some short-term funds. Which group of lenders would put greater emphasis on a firm's liquidity ratio when evaluating a potential borrower? O Short-term lenders O Long-term lenders The most recent data from the annual balance sheets of Free Spirit Industries Inc. and Zebra Paper Corp. are as follows: Balance Sheet December 31st (Millions of dollars) Zebra Paper Corp. Free Spirit Industries Inc. Zebra Paper Corp Free Spirit Industries Inc. Assets Liabilities Current liabilities Current assets $3,444 1,260 3,696 8,400 $0 0 4,050 4,050 4,950 9,000 $2,214 Accounts payable $0 759 4,303 5,062 6,188 11,250 Cash Accounts receivable Inventories 810 2,376 5,400 Accruals Notes payable Total current assets Net fixed assets Net plant and equipment Total current liabilities Long-term bonds 6,600 6,600 Total debt Common equity 2,438 1,312 3,750 15,000 1,950 1,050 3,000 12,000 Common stock Retained earnings Total common equity Total assets 15,000 12,000 abilities and equity Enter the values of the current and quick ratios for Free Spirit Industries Inc. and Zebra Paper Corp.: Free Spirit Zebra Paper Corp. Ratio Industries Inc. Current Quick Which of the following statements are true? Check all that apply Free Spirit Industries Inc. has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Zebra Paper Corp.. 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 the company depends heavily on the sale of its inventory to meet its short-term obligations. Free Spirit Industries Inc. has a better ability to meet its short-term liabilities than Zebra Paper Corp. An increase in the current ratio over time always means that the company's liquidity position is improving One of the most important assumptions behind the calculation of the quick ratio is that the firm's accounts receivable converted into cash within the time period for which credit was granted beStep by Step Solution
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