Problem 6 (15%) A. The following data are available for two firms: Average current liabilities Average total liabilities Return on assets Interest expense Cash from operations Firm 1 $1,000 3,000 5% 120 400 Firm 2 $4,000 6,000 6% 420 600 Explain why the following statements are CORRECT! Make sure to cite or make calculations using the above data to fully support your answers! 1. "Even though Firm 2 has 50% more cash from operations than Firm 1 ($600 vs. $400), Firm 1 is in the strongest position to pay its current bills." 2. "Even though Firm 2's return on assets exceeded Firm l's (6% vs. 5%), Firm 1 was more successful than Firm 2 in its use of leverage (borrowing)." B The following facts are known concerning Moss Corporation: $27,300 WT. AVE $24,136 LIFO (FISH) Ending inventory: $30,812 FIFO (LISH) Weighted average unit cost = $7.80 Calculation # of Units 1. How many units were in ending inventory? 2. Have prices (inventory purchase costs) been rising, falling, or remaining constant? Explain. Problem 6 (15%) A. The following data are available for two firms: Average current liabilities Average total liabilities Return on assets Interest expense Cash from operations Firm 1 $1,000 3,000 5% 120 400 Firm 2 $4,000 6,000 6% 420 600 Explain why the following statements are CORRECT! Make sure to cite or make calculations using the above data to fully support your answers! 1. "Even though Firm 2 has 50% more cash from operations than Firm 1 ($600 vs. $400), Firm 1 is in the strongest position to pay its current bills." 2. "Even though Firm 2's return on assets exceeded Firm l's (6% vs. 5%), Firm 1 was more successful than Firm 2 in its use of leverage (borrowing)." B The following facts are known concerning Moss Corporation: $27,300 WT. AVE $24,136 LIFO (FISH) Ending inventory: $30,812 FIFO (LISH) Weighted average unit cost = $7.80 Calculation # of Units 1. How many units were in ending inventory? 2. Have prices (inventory purchase costs) been rising, falling, or remaining constant? Explain