The Balance Sheets of Two Competing Companies in the Same

question 95

Essay

The balance sheets of two competing companies in the same industry are provided below. The companies have approximately the same volume of sales and similar operating capacities. Instructions
a. Calculate the Debt to Total Assets ratio for both companies. Which company is more solvent?
b. Based on the information provided, can horizontal analysis be used to determine which company is more profitable?

---

Definitions:

Deed

A writing, sealed and delivered by the parties; an instrument conveying real property.

Primarily Liable

A legal term describing the party who bears the main responsibility in the fulfillment of an obligation or the payment of a debt.

Artisan Lien

A legal right granted to craftsmen or laborers to retain possession of a client's property until payment is received for services rendered.

Entrusted

Pertains to the act of giving someone the responsibility to take care of something or to carry out a task or duty.