Company a Has Current Assets of $42 Billion and Current

question 35

Multiple Choice

Company A has current assets of $42 billion and current liabilities of $31 billion. Company B has current assets of $2.7 billion and current liabilities of $1.8 billion. Which of the following statements is correct, based on this information?

• A) Company A and Company B have roughly equivalent enterprise values.
• B) Company A has greater leverage than Company B.
• C) Company A has less leverage than Company B.
• D) Company A is less likely than Company B to have sufficient working capital to meet its short-term needs.

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Definitions:

Financial Statements

A set of formal records that outline the financial activities and condition of a business, entity, or individual, including the balance sheet, income statement, and cash flow statement.

Long-term Investments

Assets that a company intends to hold for more than one fiscal year, such as stocks, bonds, or real estate.

Property Plant

Assets of a tangible nature, like buildings and machinery, used in operations and expected to be used over several years.

Equipment Section

Part of a company's balance sheet or financial statements that lists the tangible assets used in operations, like machinery, along with their net book values.