Problem: Below is selected financial information from the financial statements of company A and company B. Both company A and company B started their business on 1/1/2019.
|
|
Company A
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Company B
|
|
Current assets on 12/31/2019
|
100
|
8,000
|
|
Total assets on 12/31/2019
|
11,000
|
28,000
|
|
Current liability on 12/31/2019
|
200
|
4,000
|
|
Total liability on 12/31/2019
|
4,000
|
18,000
|
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Sales revenue on 12/31/2019
|
4,500
|
20,000
|
|
Cost of goods sold for year 2019
|
1,000
|
16,000
|
|
Interest expense for year 2019
|
400
|
1,000
|
|
Net income for year 2019
|
1,500
|
2,500
|
Required:
Q1. Which company provides better return on assets?
Q2. Which company has less liquidity risk in terms of current ratio?
Q3. Which company has less solvency risk in terms of debt to total assets ratio?
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