Little Company Wants to Buy a New Warehouse

question 78

Essay

Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:

-Refer to the balance sheet above.
a.What is Little Company's current ratio now?
b.If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder,what will Little Company's current ratio be?
c.If Little Company buys a $10,000 warehouse by paying cash for the full amount,what will Little Company's current ratio be?
d.Is it ethical to structure business transactions so that the company's ratios look as good as possible?

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Definitions:

John Marshall

The fourth Chief Justice of the United States (1801-1835), whose court opinions helped lay the basis for American constitutional law and made the Supreme Court a coequal branch of government.

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A newspaper published in Washington D.C. from 1800 to 1870, which became an influential publication in American politics during the early 19th century.

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A speech given during a ceremony that marks the beginning of a leader's term in office, often setting the tone and direction for their administration.