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urrent Assets Lincoln Company Jefferson Corporation Cash $ 90,500 $ 45,500 Temporary investments 75,000 25,000 Accounts receivable (net) 115,000 90,000 Inventories 264,000 380,000 Prepaid expenses
urrent Assets
Lincoln Company Jefferson Corporation
| Cash | $ 90,500 | $ 45,500 | |
| Temporary investments | 75,000 | 25,000 | |
| Accounts receivable (net) | 115,000 | 90,000 | |
| Inventories | 264,000 | 380,000 | |
| Prepaid expenses | 5,500 | 9,500 | |
| Total current assets | $550,000 | $550,000 | |
| Total current assets | $550,000 | $550,000 | |
| Less current liabilities | 210,000 | 210,000 | |
| Working capital | $340,000 | $340,000 | |
| Current ratio ($550,000/$210,000) | 2.6 | 2.6 |
Both companies show the current ratio of 2.6, but which company is more liquid and why? Does it mean that financial ratios analysis has lost its creditability?
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