The Following Information Is Summarized from the Balance Sheets of Gear

question 115

Essay

The following information is summarized from the balance sheets of Gear Mart Corporation and Function Junction,Inc.at December 31,2017:
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$\begin{array}{lrr}&\text { Gear Mart }&\text { Function Junction }\\\text { Current assets: }\\\text { Cash and cash equivalents } & \$ 340,800 & \$ 100,200 \\\text { Short-term investments } & 12,000 & 7,600 \\\text { Accounts receivable, net } & 377,000 & 42,000 \\\text { Notes receivable, net } & 36,300 & 18,000 \\\text { Other current assets } & 207,400 & 40,000 \\\quad \text { Total current assets } & \$ 973,500 & \$ 207,800\\\\\text { Current liabilities } & \$ 860,900 & \$ 150,000 \\\text { Other liabilities } & 5,000,400 & 300,500 \\\text { Stockhol ders' equity } & 2,400,300 & 800,700\end{array}$ 1) Using the information provided above, compute the following for each company at December 31, 2018:
A. Working capital
B. Current ratio
C. Acid-test ratio
2) Comment briefly on the liquidity of each of these two companies. Which company appears to be the most liquid?

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Definitions:

Good Faith

A concept involving an honest intention to act without taking an unfair advantage over another party, typically implied in agreements or transactions.

Uncertified Check

A check that the bank has not guaranteed or verified regarding the availability of funds, standing in contrast to a certified check.

Presented For Payment

The act of submitting a financial instrument, such as a check or draft, to the responsible party for the transfer of funds as specified.

Negotiable Instrument

A written document guaranteeing the payment of a specified amount of money, either on demand or at a set time, with the payer named on the document.