Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved 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

image text in transcribed

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 Long-term lenders O Short-term lenders The most recent data from the annual balance sheets of N&B Equipment Company and Scramouche Opera Company are as follows Balance Sheet December 31st (Millions of dollars) Scramouche Opera Company N&B Equipment Company Scramouche Opera Company N&B Equipment Company Assets Liabilities Current assets Current liabilities 1,476 Accounts payable Cash Accounts receivable Inventories $2,296 840 2,464 5,600 50 506 2,869 3,375 4,125 7,500 50 540 Accruals 1,584 Notes payable 3,600 Total current liabilities Total current assets Net fixed assets Net plant and equipment 2,700 2,700 3,300 6,000 Long-term bonds 4,400 4,400 Total debt Common equity 1,300 700 2,000 8,000 Common stock 1,625 875 2,500 10,000 Retained earnings Total common equity Total liabilities and equity Total assets 10,000 8,000 N&B Equipment Company's quick ratio is , and its current ratio is 1.3333Scramouche Opera Company's quick ratio is and its current ratio is Which of the following statements are true? Check all that apply Scramouche Opera Company has a better ability to meet its short-term liabilities than N&B Equipment Company If a company's current liabilities are increasing faster than its current assets, the company's liquidity position is weakening 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-termobligations. Compared to N&B Equipment Company, Scramouche Opera Company has less liquidity and a lower reliance on outside cash flow to finance its short-term obligations

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

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

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

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

Get Started

Students also viewed these Finance questions