E2-8 (Using working capital to assess solvency) A retail companys recent balance sheets showed the following information.
Question:
E2-8 (Using working capital to assess solvency) A retail company’s recent balance sheets showed the following information. Accounts payable is the only current liability. 12/31/96 12/31/95 Cash $ 4,500 $ 7,000 Accounts receivable 6,000 9,000 Inventory 14,000 10,000 Total current assets $24,500 $26,000 Accounts payable 12,000 11,000 Current assets minus current liabilities $12,500 $15,000 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: