The most recent data from the annual balance sheets of Fitcom Corporation and Scaramouche Opera Company are as follows:
Balance Sheet - December 31st (Millions of dollars)
Scaramouche Opera Fitcom Corporation
Liabilities
Current liabilities
Accounts payable $0 $0
Accruals $2,869 $2,700
Notes payable $3,375 $2,700
Total current liabilities $6,244 $5,400
Assets
Current assets
Cash $2,296 $1,476
Accounts receivable $840 $540
Inventories $2,464 $1,584
Total current assets $5,600 $3,600
Net fixed assets $4,400 $4,400
Long-term bonds $4,125 $3,300
Common equity
Common stock $1,625 $1,300
Retained earnings $875 $700
Total common equity $2,500 $2,000
Total liabilities and equity $10,000 $8,000
Total assets $10,000 $8,000
Fitcom Corporation's quick ratio is 0.8960 and its current ratio is 0.625.
Scaramouche Opera Company's quick ratio is 0.714 and its current ratio is 0.675.
Which of the following statements are true? Check all that apply.
- Fitcom Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Scaramouche Opera Company.
- If a company's current liabilities are increasing faster than its current assets, the company's liquidity position is weakening.
- An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well.
- Fitcom Corporation has a better ability to meet its short-term liabilities than Scaramouche Opera Company.
- An increase in the current ratio over time always means that the company's liquidity position is improving.
