Which of the following choices best describes reasonable conclusions that you might make about the two companies’ ability to pay their current and long-term obligations? A. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, and Company A is also more solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent. B. Company A’s current ratio of 0.25 indicates it is less liquid than Company B, whose current ratio is 0.83, and Company A is also less solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent. C. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to- equity ratio.
Which of the following choices best describes reasonable conclusions that you might make about the two companies’ ability to pay their current and long-term obligations? A. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, and Company A is also more solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent. B. Company A’s current ratio of 0.25 indicates it is less liquid than Company B, whose current ratio is 0.83, and Company A is also less solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent. C. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to- equity ratio.
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 3MC: The following is selected financial data from Block Industries: How much does Block Industries have...
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Which of the following choices best describes reasonable conclusions that you might make about the two companies’ ability to pay their current and long-term obligations?
A. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, and Company A is also more solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent.
B. Company A’s current ratio of 0.25 indicates it is less liquid than Company B, whose current ratio is 0.83, and Company A is also less solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent.
C. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to- equity ratio.
Transcribed Image Text:You observe the following data for the following companies:
Company B
(Php '000)
6,000
1,000
60,000
700,000
50,000
150,000
Company A
(Php '000)
4,500
Revenue
Net income
50
Current assets
40,000
100,000
10,000
60,000
Total assets
Current liabilities
Total debt
Shareholders' equity
30,000
500,000
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