E2-1Q (Using working capital to assess solvency) A manufacturing companys recent balance sheets showed the following information.
Question:
E2-1Q (Using working capital to assess solvency) A manufacturing company’s recent balance sheets showed the following information. Accounts payable is the only current liability. 12/31/96 12/31/95 Cash $ 8,500 $ 9,000 Accounts receivable 15,000 12,000 Inventory 17,000 15,000 Total current assets $40,500 $36,000 Accounts payable 26,000 20,000 Current assets minus current liabilities $14,500 $16,000 REQUIRED: Define solvency and discuss how this information might be useful in assessing the company’s solvency position. What drawbacks are associated with using this information in this way?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: