Balance Sheet December 31st (Millions of dollars) Pellegrini Pellegrini Foodstuf
ID: 2808530 • Letter: B
Question
Balance Sheet December 31st (Millions of dollars) Pellegrini Pellegrini Foodstuffs Southern Corporation Corporation ing ing Foodstuffs Southern Corporation Corporation Assets Liabilities Current assets Current liabilities s0 $2,583 945 2,772 6,300 $o 570 3,227 3,797 4,640 8,437 $1,660 Accounts payable 608 Accruals 1,782 Notes payable 4,050 Total current liabilities Accounts receivable Inventories Total current assets Net fixed assets Net plant and equipment 3,037 3,037 3, 13 6,750 Long-term bonds 4,950 4,950 Total debt Common equity 1,828 985 2,813 11,20 1,463 787 2,250 9,000 Common stock Retained earnings Total common equity Total assets 11,250 9,000 Total liabilities and equity i Jing Foodstuffs Corporation's quick grini Southern Corporation's quick ratio is is .and its current ratio is , and its current ratio is ch of the following statements are true? Check all that apply ing Foodstuffs Corporation has a better ability to meet its short-term liabilities than Pellegrini Southern Corporation. 1 If a company's current liabilities are increasing faster than its current assets, the company's liquidity position is weakening. 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 Pellegrini Southern Corporation, Jing Foodstuffs Corporation has less liquidity and a lower reliance on outside cas flow to finance its short-term obligations. An increase in the current ratio over time always means that the company's liquidity position is improvingExplanation / Answer
Answer a.
Jing Foodstuffs Corporation:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $6,300 / $3,797
Current Ratio = 1.66
Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
Quick Ratio = ($2,583 + $945) / $3,797
Quick Ratio = 0.93
Pellegrini Southern Corporation:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $4,050 / $3,037
Current Ratio = 1.33
Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
Quick Ratio = ($1,660 + $608) / $3,037
Quick Ratio = 0.75
Answer b.
Jing Foodstuffs Corporation has a better ability to meet its short-term liabilities than Pellegrini Southern Corporation.
If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.
An increase in the current ratio over time always means that the company’s liquidity position is improving.
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