Company a Has Current Assets of $42 Billion and Current

question 111

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

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Definitions:

Equivalent Unit Cost

The costing method used in process costing that calculates the cost per unit taking into consideration the stage of completion of goods in process.

Process Costing

An accounting method used where production is continuous, and costs are assigned to units of product based on the processes they undergo.

Weighted-Average Method

A costing method used in process costing that averages the costs for units in production, combining costs from the current and previous periods.

Conversion Costs

The sum of direct labor and manufacturing overhead costs, representing the costs necessary to convert raw materials into finished goods.