Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 11 3 pt You have been given a large inheritance from a rich relative you never met before you want to invest it wisely

image text in transcribed
Question 11 3 pt You have been given a large inheritance from a rich relative you never met before you want to invest it wisely so you have searched for just the right opportunity. You have set out the parameters you need for a good investment and Aerotyn Circuits Limited, a new electronics company has hit all the criteria you set. You are feeling good! You simply need to do one more calculation before the final decision, which must be made in the next 15 minutes. Just then your large dos jumps up on the table, grabs their financial statements and runs out the front screen door. You know he is going to the park to bury them, and you have no way to catch him in time. You send your partner to get your dog back. You just had that 1 last calculation to do, and now the hinancial statements are gone. You remember that the last calculation you needed was to make sure that they have a current ratio better than or equal to 1,35 and an acid test of 1.0 or better. Then it hits you. You still have your note pad with the following information written on it The data lists the following: Total Assets $1,300.000 Cash and short-term investments $480.000 Prepaid insurance and rent $18,000 Property plant and equipment $447.000. Goodwill $200,000 The only other asset is their inventory You also have notes that say the shareholders equity was $450,000, and long-term liabilities were $390.000 You look at your watch, and you are now down to 13 minutes and feel like you want a drink of ale to drown your sorrows. ALE Oh my gosh! That is the answet. You know how to figure it out! What do you conclude after your calculations? This is a great company. It's well above both the guidelines you established The company is above the cameratio required, but is below the acid test guideline The company is below both the guidelines The companyies the test but comes to the short on the current ratio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

ISO 9001 2015 Audit Procedures

Authors: Ray Tricker

4th Edition

1138025895, 978-1138025899

More Books

Students also viewed these Accounting questions