
(a)
Liquidity ratio measures the short-term capacity of a company to pay its maturing obligations and to meet unanticipated requirements for cash. Liquidity ratios are
Solvency ratio
Solvency ratio measures the capacity of a company to sustain over a long period of time. Solvency ratios are debt to assets ratio, time interest earned ratio, debt to equity ratio, and more.
To Discuss: The largest current liability of “P” Company and “C.C” Company.
(b)
To Calculate: The working capital and current ratio of “P” Company and “C.C” Company.
(c)
To Discuss: The relative liquidity of “P” Company and “C.C” Company.
(d)
To Compute: The debt to asset ratio and times interest earned ratio for “P” Company and “C.C” Company.
(e)
To Identify: The conclusion of the “P” Company and W long-run solvency can be drawn from above calculated ratios.

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Chapter 10 Solutions
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