Question 2

Balance Sheet December 31st (Millions of dollars) Free Spirit Foodstuffs Industries ing Free Spirit Foodstuffs Industries ing Inc. Inc. Inc. Inc. Assets Liabilities Current assets Current liabilities Cash Accounts receivable Inventories $3,157 1,155 3,388 7,700 $2,029 Accounts paya Accruals 50 696 3,944 4,640 5,672 10,312 50 743 2,178 Notes payable 4.950 Total current assets Net fixed assets Net plant and equipment 3,712 3,712 4,538 8,250 Total current liabilities Long-term bonds 6,050 6,050 Total debt Common equity 1,788 962 2,750 11,000 Common stock 2,235 1,203 3,438 13,750 Retained earnings Total common equity Total liabilities and equity Total assets 13,750 11,000 -; Jing Note: Round your values to four decimal places. Free Spirit Industries Inc.'s current ratio is Sand its quick ratio is Jing Foodstuffs Inc.'s current ratio is , and its quick ratio is Which of the following statements are true? Check all that apply Jing Foodstuffs Inc. has a better ability to meet its short-term liabilities than Free Spirit Industries Inc. 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. Compared to Free Spirit Industries Inc., Jing Foodstuffs Inc. has less liquidity and a lower reliance on outside cash flow to finance its short-term obligations. An increase in the current ratio over time always means that the company's liquidity position is improving