The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows: Balance Sheet December 31st31st (Millions of dollars) LeBron Sports Equipment Corporation Free Spirit Industries Corporation LeBron Sports Equipment Corporation Free Spirit Industries Corporation Assets Liabilities Current assets Current liabilities Cash $861 $553 Accounts payable $0 $0 Accounts receivable 315 203 Accruals 190 0 Inventories 924 594 Notes payable 1,075 1,012 Total current assets $2,100 $1,350 Total current liabilities $1,265 $1,012 Net fixed assets Long-term bonds 1,547 1,238 Net plant and equipment 1,650 1,650 Total debt $2,812 $2,250 Common equity Common stock $610 $488 Retained earnings 328 262 Total common equity $938 $750 Total assets $3,750 $3,000 Total liabilities and equity $3,750 $3,000 Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is . Which of the following statements are true? Check all that apply. Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation. A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities. 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. Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation. An increase in the current ratio over time always means that the company’s liquidity position is improving.
The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows: Balance Sheet December 31st31st (Millions of dollars) LeBron Sports Equipment Corporation Free Spirit Industries Corporation LeBron Sports Equipment Corporation Free Spirit Industries Corporation Assets Liabilities Current assets Current liabilities Cash $861 $553 Accounts payable $0 $0 Accounts receivable 315 203 Accruals 190 0 Inventories 924 594 Notes payable 1,075 1,012 Total current assets $2,100 $1,350 Total current liabilities $1,265 $1,012 Net fixed assets Long-term bonds 1,547 1,238 Net plant and equipment 1,650 1,650 Total debt $2,812 $2,250 Common equity Common stock $610 $488 Retained earnings 328 262 Total common equity $938 $750 Total assets $3,750 $3,000 Total liabilities and equity $3,750 $3,000 Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is . Which of the following statements are true? Check all that apply. Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation. A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities. 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. Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation. An increase in the current ratio over time always means that the company’s liquidity position is improving.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 89E: Ratio Analysis Rising Stars Academy provided the following information on its 2019 balance sheet and...
Related questions
Question
The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows:
Balance Sheet December 31st31st (Millions of dollars)
| LeBron Sports Equipment Corporation | Free Spirit Industries Corporation | LeBron Sports Equipment Corporation | Free Spirit Industries Corporation | ||
| Assets | Liabilities | ||||
| Current assets | Current liabilities | ||||
| Cash | $861 | $553 | Accounts payable | $0 | $0 |
| Accounts receivable | 315 | 203 | Accruals | 190 | 0 |
| Inventories | 924 | 594 | Notes payable | 1,075 | 1,012 |
| Total current assets | $2,100 | $1,350 | Total current liabilities | $1,265 | $1,012 |
| Net fixed assets | Long-term bonds | 1,547 | 1,238 | ||
| Net plant and equipment | 1,650 | 1,650 | Total debt | $2,812 | $2,250 |
| Common equity | |||||
| Common stock | $610 | $488 | |||
| 328 | 262 | ||||
| Total common equity | $938 | $750 | |||
| Total assets | $3,750 | $3,000 | Total liabilities and equity | $3,750 | $3,000 |
Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is .
Which of the following statements are true? Check all that apply.
Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation.
A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities.
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.
Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation.
An increase in the current ratio over time always means that the company’s liquidity position is improving.
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning