Question
Asked Apr 10, 2019
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the following information was drawn from the balance sheets of the kansas and montana companies:

current assets: kansas-54,000 montana- 76,000

current liabilites: kansas-27000 montana-30400

a. compute the current ration for each company.

b. which company has the greater likelihood of being able to pay its bills?

c. assume that both companies have the same amount of total assets.  Speculate as to which company would produce the higher return on assets ratio?

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Expert Answer

Step 1

a. Calculate the current ratio for each company:

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Step 2

Thus, the current ratio of Kansas Company and Montana Company is 2:1 and 2.5: 1 respectively.

Step 3

b. Identify the company that has the higher ability ...

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