Question

The most recent data from the annual balance sheets of Free Spirit Industries Inc. and LeBron Sports Equipment Inc. are as follows: Balance Sheet December 31st (Millions of dollars) LeBron Sports Free Spirit LeBron Sports Equipment Inc. Industries Inc. Equipment Inc. Liabilities Free Spirit Industries Inc. Assets Current assets Current liabilities Cash $1,435 $922 Accounts $0 payable Accounts 525 338 Accruals 316 receivable Inventories Notes payable 1,687 1,540 3,500 990 2,250 1,793 2,109 1,687 Total current assets Total current liabilities Net fixed assets 2,578 2,063 Long-term bonds 2,750 2,750 Total debt 4,687 3,750 Net plant and equipment Common equity Common stock 813 1,016 547 Retained 437 earnings Total common 1,563 1,250 equity Total assets Total assets 6,250 6,250 5,000 5,000 Total liabilities 6,250 5,000 and equity

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Answer 1

rate positively ..

Balance sheet
		Leborn	Free sprit			Leborn	Free sprit
				0
Assets					Liabilities and equity
Current asset					Current liabilities
Cash		1435	922		Account payable	0	0
Account receivable		525	338		Accruals	316	0
inventories		1540	990		Notes payable	1793	1687
Total current assets		3500	2250		Total current liabilities	2109	1687
					Long term debt	2578	2063
Net fixed asset					Total debt	4,687	3750
Net plant and equipment - Note 2		2750	2750		Common equity :
					Common stock	1016	813
					Retained earning note -4	547	437
					Total common equity	1563	1250
Total Assets		6250	5000		Total liabilities and equity	6,250	5,000
Current ratio = Current asset / Current liabilities
		Leborn	Free sprit
		1.66	1.33
Quick ratio = (current ratio-Inventories)/Current liabilities
		Leborn	Free sprit
		0.93	0.75
ans =2	Free sprit industries current ratio is 1.33 and its quick ratio is 0.75 whereas Leborn sports equipment quick ratios is 0.93 and current ratio is 1.66
ans 3=
Correct answers are -
		Free sprit industries has less liquidity but also a greater reliance on outside cash flow to finance its short term obligation than leborn sport equipment inc.
		A current ratio of 1 indicate that book value of the company’s current asset is equal to the book value of 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 ratio is large , it would mean that the company depand heavily on the sale of its inventory to meet its short term obligation