Intella's current assets total to $20 million versus $10 million of current liabilities, while AWD's current assets are $10 million versus $20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions? OA. The transactions would improve Intella's financial strength as measured by its current ratio but lower AWD's current ratio. O B. The transactions would lower Intella's financial strength as measured by its current ratio but raise AWD's current ratio. O C. The transactions would have no effect on the firm' financial strength as measured by their current ratios. O D. The transactions would lower both firm' financial strength as measured by their current ratios. O E. The transactions would improve both firms financial strength as measured by their current ratios.
Intella's current assets total to $20 million versus $10 million of current liabilities, while AWD's current assets are $10 million versus $20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions? OA. The transactions would improve Intella's financial strength as measured by its current ratio but lower AWD's current ratio. O B. The transactions would lower Intella's financial strength as measured by its current ratio but raise AWD's current ratio. O C. The transactions would have no effect on the firm' financial strength as measured by their current ratios. O D. The transactions would lower both firm' financial strength as measured by their current ratios. O E. The transactions would improve both firms financial strength as measured by their current ratios.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:Intella's current assets total to $20 million versus $10 million of current liabilities, while AWD's current assets are $10 million versus $20
million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively
plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements
below best describes the results of these transactions?
OA. The transactions would improve Intella's financial strength as measured by its current ratio but lower AWD's current ratio.
O B. The transactions would lower Intella's financial strength as measured by its current ratio but raise AWD's current ratio.
O C. The transactions would have no effect on the firm' financial strength as measured by their current ratios.
O D. The transactions would lower both firm' financial strength as measured by their current ratios.
O E. The transactions would improve both firms' financial strength as measured by their current ratios.
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