The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows: Balance Sheet December 31st31st (Millions of dollars) LeBron Sports Equipment Corporation Free Spirit Industries Corporation LeBron Sports Equipment Corporation Free Spirit Industries Corporation Assets Liabilities Current assets Current liabilities Cash $861 $553 Accounts payable $0 $0 Accounts receivable 315 203 Accruals 190 0 Inventories 924 594 Notes payable 1,075 1,012 Total current assets $2,100 $1,350 Total current liabilities $1,265 $1,012 Net fixed assets Long-term bonds 1,547 1,238 Net plant and equipment 1,650 1,650 Total debt $2,812 $2,250 Common equity Common stock $610 $488 Retained earnings 328 262 Total common equity $938 $750 Total assets $3,750 $3,000 Total liabilities and equity $3,750 $3,000 Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is . Which of the following statements are true? Check all that apply. Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation. A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations. Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation. An increase in the current ratio over time always means that the company’s liquidity position is improving.

The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows: Balance Sheet December 31st31st (Millions of dollars) LeBron Sports Equipment Corporation Free Spirit Industries Corporation LeBron Sports Equipment Corporation Free Spirit Industries Corporation Assets Liabilities Current assets Current liabilities Cash $861 $553 Accounts payable $0 $0 Accounts receivable 315 203 Accruals 190 0 Inventories 924 594 Notes payable 1,075 1,012 Total current assets $2,100 $1,350 Total current liabilities $1,265 $1,012 Net fixed assets Long-term bonds 1,547 1,238 Net plant and equipment 1,650 1,650 Total debt $2,812 $2,250 Common equity Common stock $610 $488 Retained earnings 328 262 Total common equity $938 $750 Total assets $3,750 $3,000 Total liabilities and equity $3,750 $3,000 Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is . Which of the following statements are true? Check all that apply. Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation. A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations. Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation. An increase in the current ratio over time always means that the company’s liquidity position is improving.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows:

Balance Sheet December 31st31st (Millions of dollars)

	LeBron Sports Equipment Corporation	Free Spirit Industries Corporation		LeBron Sports Equipment Corporation	Free Spirit Industries Corporation
Assets			Liabilities
Current assets			Current liabilities
Cash	$861	$553	Accounts payable	$0	$0
Accounts receivable	315	203	Accruals	190	0
Inventories	924	594	Notes payable	1,075	1,012
Total current assets	$2,100	$1,350	Total current liabilities	$1,265	$1,012
Net fixed assets			Long-term bonds	1,547	1,238
Net plant and equipment	1,650	1,650	Total debt	$2,812	$2,250
			Common equity
			Common stock	$610	$488
			Retained earnings	328	262
			Total common equity	$938	$750
Total assets	$3,750	$3,000	Total liabilities and equity	$3,750	$3,000

Free Spirit Industries Corporation’s quick ratio is , and its current ratio is ; LeBron Sports Equipment Corporation’s quick ratio is , and its current ratio is .

Which of the following statements are true? Check all that apply.

Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation.

A current ratio of 1 indicates that the book value of the company’s current assets is equal to the book value of its current liabilities.

If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.

Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation.

An increase in the current ratio over time always means that the company’s liquidity position is improving.

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