For Company a and Company B

question 184

Essay

For Company A and Company B:
a) Calculate the quick ratio for each company.
b) Comment on which one is more able to meet current liabilities.

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Definitions:

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Percentage of Sales Method

A financial forecasting model that predicts future sales based on historical sales data.

Matching Principle

An accounting concept that dictates expenses should be recorded in the same period as the revenues they help to generate, ensuring accurate financial reporting.

Uncollectible Receivables

Debts owed to a company that are considered unlikely to be paid and are thus written off as a loss.