Partial Income Statements of Company a and Company B Are

question 50

Multiple Choice

Partial income statements of Company A and Company B are provided below: Company A
$\begin{array}{|l|r|r|}\hline \text { Revenue } & & \\\hline \text { Expenses: } & & \\\hline \text { Utilities Expense } & \$ 50,000 \\\hline \text { Salaries Expense } & 15,000 & \\\hline \text { Rent Expense } & \underline{3,700} \\\hline\text { Total Expenses }&&23,700\\\hline\text { Operating Income }&&\$56,300\\\hline\end{array}$ Company B
$$\begin{array} { | l | r | r | } \hline \text { Revenue } & & \$ 50,000 \\\hline \text { Cost of Goods Sold: } & & \\\hline \text { Beginning Merchandise Inventory } & \$ 4,000 & \\\hline \text { Purchases and Freight In } & 23,000 & \\\hline \text { Cost of Goods Available for Sale } & 27,000 & \\\hline \text { Ending Merchandise Inventory } & \underline { ( 5,500 } & \\\hline \text { Cost of Goods Sold } & & 21,500 \\\hline \text { Gross Profit } & & \$ 28,500 \\\hline\end{array}$$ Which of the following statements is true?

• A)Company A is a merchandising company.
• B)Company B is a manufacturing company.
• C)Company A is a manufacturing company.
• D)Company A is a service company.

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Definitions:

Net Working Capital

Represents a measure of a firm's liquidity by calculating the excess of current assets over current liabilities, portraying the company's operational efficiency.

Current Assets

Assets owned by a company that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle.

Current Liabilities

Short-term financial obligations that are due within one year, typically including accounts payable, short-term loans, and other debts.

Par Value

The face value of a bond or a stock, representing the amount of money that the holder will get back at maturity.