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.

---

Definitions:

Straight-Line Method

A depreciation method that allocates an equal portion of the cost of a fixed asset to each accounting period over its useful life.

Amortization

The process of gradually reducing the cost of an intangible asset through scheduled periodic payments over its useful life.

Annual Interest Expense

Annual Interest Expense refers to the total cost incurred by an entity over a fiscal year for borrowing funds, encompassing interest payments on loans, bonds, and other forms of debt.

Semiannually

Occurring or done twice a year, typically every six months.