15th Edition

ISBN: 9781337670517

Author: WARREN

Publisher: Cengage

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Chapter 4, Problem 4.6MAD

Analyze and compare Alphabet (Google) and Microsoft

Alphabet Inc. (GOOG) and Microsoft Corporation (MSFT) design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Alphabet’s primary source of revenue is from advertising, while Microsoft’s is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies:

Chapter 4, Problem 4.6MAD, Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation , example 1

a. Compute the working capital for each company for both years.

b. Which company has the larger working capital at the end of Year 2?

c. Chapter 4, Problem 4.6MAD, Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation , example 2 Is working capital a good measure of relative liquidity in comparing the two companies? Explain.

d. Compute the current ratio for both companies. Round to one decimal place.

e. Chapter 4, Problem 4.6MAD, Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation , example 3 Which company has the larger relative liquidity based on the current ratio?

f. Chapter 4, Problem 4.6MAD, Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation , example 4 Based on your analysis, comment on the short-term debt-paying ability of these two companies.

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Chapter 4, Problem 4.5MAD

Chapter 4, Problem 4.1TIF

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Chapter 4 Solutions

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Solution Summary: The author explains that working capital is not a good measure of the relative liquidity in comparing the two companies.

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