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Analyze and compare Zynga, Electronic Arts, and Take-Two Data (in millions) from recent financial statements of Zynga Inc. (ZNGA), Electronic Arts Inc. (EA), and Take-Two Interactive Software, Inc. (TTWO) are as follows: a. Compute the working capital for Year 2 and Year 1 for each company. b. Which company has the largest working capital? c. Compute the current ratio for Year 2 and Year 1 for each company. Round to one decimal place. d. For Year 2, rank the companies from most liquid to least liquid based upon the current ratio.
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Analyze and compare Zynga, Electronic Arts, and Take-Two
Data (in millions) from recent financial statements of Zynga Inc. (ZNGA), Electronic Arts Inc. (EA), and Take-Two Interactive Software, Inc. (TTWO) are as follows:
- a. Compute the working capital for Year 2 and Year 1 for each company.
- b. Which company has the largest working capital?
- c. Compute the current ratio for Year 2 and Year 1 for each company. Round to one decimal place.
- d. For Year 2, rank the companies from most liquid to least liquid based upon the current ratio.
a.
Compute the working capital for Year 2 and Year 1 for Company Z, Company EA and Company TT.
Explanation of Solution
Working capital: Working capital refers to the excess amount of current assets over its current liabilities of a business. It measures the excess funds that are required for the companies to carry out their day to day operations, excluding any new funds that have been invested during the year. Working capital is calculated by using the formula:
Compute the working capital of Company Z for Year 2 and Year 1:
| Particulars | Year 2 | Year 1 |
| Current assets | $966 | $1,112 |
| Less: Current liabilities | $244 | $236 |
| Working capital | $722 | $876 |
Table (1)
Thus, the working capital of Company Z for Year 2 and Year 1 is $722 and $876 respectively
b.
Identify the company that has the largest working capital.
c.
Compute the current ratio for Year 2 and Year 1 for Company Z, Company EA and Company TT.
d.
Rank the companies from most liquid to least liquid based on the current ratio for the Year 2.
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