The balance sheets for Red Oak Inc. and Birch Co. follow. Red Oak Birch Current assets Cash $8,000 $10,000 Short-term investments 3,000 Accounts receivable 40,000 18,000 Inventory 17,000 5,000 Other 5,000 6,000 Noncurrent assets 285,000 317,000 Total assets $358,000 $356,000 Current liabilities $48,000 $30,000 Long-term liabilities 30,000 230,000 280,000 96,000 Stockholders' equity Total liabilities and stockholders' equity $358,000 $356,000 Required Calculate the following ratios and comment on the results. Red Oak: Ratio Numerator Denominator Result a. Current ratio $ 0x - $ 0x = b. Quick ratio $ 0x = $ 0x = Birch: Ratio Numerator Denominator Result a. Current ratio $ 0 x $ 0x = b. Quick ratio $ 0 x $ 0x = Compared to Birch Company, Red Oak has a stronger liquidity position.
The balance sheets for Red Oak Inc. and Birch Co. follow. Red Oak Birch Current assets Cash $8,000 $10,000 Short-term investments 3,000 Accounts receivable 40,000 18,000 Inventory 17,000 5,000 Other 5,000 6,000 Noncurrent assets 285,000 317,000 Total assets $358,000 $356,000 Current liabilities $48,000 $30,000 Long-term liabilities 30,000 230,000 280,000 96,000 Stockholders' equity Total liabilities and stockholders' equity $358,000 $356,000 Required Calculate the following ratios and comment on the results. Red Oak: Ratio Numerator Denominator Result a. Current ratio $ 0x - $ 0x = b. Quick ratio $ 0x = $ 0x = Birch: Ratio Numerator Denominator Result a. Current ratio $ 0 x $ 0x = b. Quick ratio $ 0 x $ 0x = Compared to Birch Company, Red Oak has a stronger liquidity position.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The balance sheets for Red Oak Inc. and Birch Co. follow.
Red Oak Birch
Current assets
Cash
$8,000 $10,000
Short-term investments
3,000
Accounts receivable
40,000
18,000
Inventory
17,000
5,000
Other
5,000
6,000
Noncurrent assets
285,000 317,000
Total assets
$358,000 $356,000
Current liabilities
$48,000 $30,000
Long-term liabilities
30,000 230,000
280,000 96,000
Stockholders' equity
Total liabilities and stockholders' equity $358,000 $356,000
Required
Calculate the following ratios and comment on the results.
Red
Oak:
Ratio
Numerator
Denominator
Result
a. Current ratio $
0x - $
0x =
b. Quick ratio $
0x = $
0x =
Birch:
Ratio
Numerator
Denominator
Result
a. Current ratio $
0 x
$
0x =
b. Quick ratio
$
0 x $
0x =
Compared to Birch Company, Red Oak has a
stronger liquidity position.
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