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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.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 4, Problem 2MAD
Textbook Problem
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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:

Chapter 4, Problem 2MAD, Analyze and compare Zynga, Electronic Arts, and Take-Two Data (in millions) from recent financial

  1. a. Compute the working capital for Year 2 and Year 1 for each company.
  2. b. Which company has the largest working capital?
  3. c. Compute the current ratio for Year 2 and Year 1 for each company. Round to one decimal place.
  4. d. For Year 2, rank the companies from most liquid to least liquid based upon the current ratio.

a.

To determine

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:

Working capital=Current assetsCurrent liabilities

Compute the working capital of Company Z for Year 2 and Year 1:

ParticularsYear 2Year 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.

To determine

Identify the company that has the largest working capital.

c.

To determine

Compute the current ratio for Year 2 and Year 1 for Company Z, Company EA and Company TT.

d.

To determine

Rank the companies from most liquid to least liquid based on the current ratio for the Year 2.

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Chapter 4 Solutions

Financial And Managerial Accounting
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