Question

Our voice, a company focused on signing up college students to vote and advocating voter rights, has provided their financial statements. Based on your liquidity analysis, what can you infer of the company?

	Income Statement				Balance Sheet
$'s in Millions	2019	2018			2019	2018
Sales	$750	$500		Cash	$1,020	$920
COGs	$325	$200		Accounts Receivables	$610	$200
SG&A	$250	$175		Pre-paid Expenses	$70	$120
Oper. Profit	$175	$125		Fixed Assets	$600	$250
Interest Expense	$15	$50		Goodwill	$100	$250
Income Before Tax	$160	$75		Total Assets	$2,400	$1,740
Tax	$56	$26
Net Income	$104	$49		Accounts Payable	$350	$220
				Accrued Liabilities	$100	$100
				Notes Payable	$100	$80
				Total Liabilities	$550	$400
				Shareholder's Equity	$1,850	$1,340

	a.	The company is able to repay all of its liabilities in the next several months
	b.	The company is able to pay off its obligations using its assets
	c.	The company can collect cash from customers relatively quickly
	d.	A and B
	e.	A, B, and C

Answer 1

Ans- Option D. A & B are right

Based on your liquidity analysis:

A- As company has enough Liquid Assets of $1630($1020+$610) of 2019 to pay off its total liability of $ 550 of 2019 in next several months.Thus the statement is correct

B- Company has enough Assets to pay off its obligation of $ 550 of 2019. Thus the statement is correct.

C- Company's Accounts Receivable balance has increased from 2018 to 2019 with $ 410 while its increase in sales from 2018 to 2019 is $ 250 (even if we asssume Sales are on Credit). Thus, Accounts Receivables have increased much higher than sales which indicates that company is not able to collect cash from customers relatively quickly. Thus the statement is incorrect