Assignment 04-Analysis of Financial Statements Activity Inform Due on Dec 18 at

Question

Assignment 04-Analysis of Financial Statements Activity Inform Due on Dec 18 at 11:59 PM PST Back to Assignment Attempts: 8 2. Liquidity ratios Most firms borrow money to finance some of their assets, and most will choose to borrow some long-term funds and some short-term Keep the Highest: 8/10 Aa Aa funds. Which group of lenders would put greater emphasis on a firm's liquidity ratio when evaluating a potential borrower? Short-term lenders O Long-term lenders The most recent data from the annual balance sheets of Pellegrini Southern Inc. and Scramouche Opera Company are as follows:

Explanation / Answer

1)

Option A

2)

Pellegrini

current ratio = CA / CL = 1800 / 1350 = 1.3333

Quick ratio = (CA - Inventory) / CL = (1800 - 792) / 1350 = 0.7467

Southern Inc.

current ratio = CA / CL = 2800 / 1687 = 1.6598

Quick ratio = (CA - Inventory) / CL = (2800 - 1232) / 1687= 0.9295

3)

Option 1,2,3,5 are correct

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