Question

Which is the stronger Company? Co A                                    &nb

Which is the stronger Company?

Co A                                         Co B

Liabilities £2m                          2m

Deferred Revenue                   Loan from Bank

Assets £5m                             £5m

Debtors, all collectible          IPR £3m

Buildings £2m

What do you think? Is it just financials that matter?

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Answer #1

Both the companies are strong both the companies have the liabilities one has deferred and one has a bank loan the only difference that we can see is company A has a collectible debtor and the value is unknown and has a building. cost 2 million whereas Company B has IPR (Intellectual Property Rights) worth 3 million. B company has a strong financial compared to company A by 1 million because the collectible debtor amount of company A is unknown.

Hence, from given data company B looks financially strong.

Only the financials don't show that the company is strong even the management who runs the company has an equal weightage on the companies strength. The company with strong management and good financial is definitely more stronger then the company with strong strong financial and poor management .

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