Question

The following accounting information exists for the Aspen and Willow companies:

	Aspen			Willow
Cash	$	17,000		$	27,000
Wages payable		20,500			20,000
Merchandise inventory		25,035			59,600
Building		40,000			90,000
Accounts receivable		32,650			38,150
Long-term notes payable		90,000			120,000
Land		45,000			50,000
Accounts payable		44,000			54,500
Sales revenue		230,000			270,000
Expenses		195,000			250,000

Required
a-1. Determine the amount of current assets and current liabilities for each company.
a-2. Compute the current ratio for each company.
b. Assuming that all assets and liabilities are listed above, compute the debt-to-assets ratios for each company.
c-1. Determine which company has the greater financial risk in the short term.
c-2. Determine which company has the greater financial risk in the long term.

Answer 1