Company a Has Current Assets of $42 Billion and Current

question 44

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.
• E)Company A is more likely than Company B to have sufficient working capital to meet its short-term needs.

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Definitions:

Graphic Form

A method of presenting information, data, or financial figures using visual elements such as charts, graphs, and diagrams.

Cost Behavior

The way in which a cost changes in relation to changes in activity levels, categorized into fixed, variable, and mixed costs.

Margin Of Safety

A figure that indicates the possible decrease in sales that may occur before an operating loss results; may be expressed in terms of sales dollars, sales units, or percent of current sales.

Unit Selling Price

The price at which a single unit of a product or service is sold, not accounting for discounts or modifications.