Bent O4- Analysls or Finandal Stdtemens LeBronPellegrini Sports Southern LeBron

Question

Bent O4- Analysls or Finandal Stdtemens LeBronPellegrini Sports Southern LeBron Pellegrini Sports Southerrn Equipment Inc. Equipment Inc. Inc. Inc. Assets Current assets Current liabilities Cash Accounts receivable Inventories $5,453 1,995 5,852 13,300 $3,505 Accounts payable $0 1,202 6,813 8,015 9,797 17,812 s0 1,283 Accruals 3,762Notes payable 8,550 Total current iabilities Total current assets Net fixed assets Net plant and equipment 6,412 6,412 7,838 14,250 Long-term bonds 10,450 10,450 Total debt Common equity 3,088 1,662 4,750 23,7509,000 Total iabilities and equity23,75019,000 3,860 2,078 5,938 Common stock Retained earmings Total common equity Total assets and its quick ratio LeBron Sports Equipment Inc. 's current ratio is Pellegrini Southern Inc.'s current ratio is and its quick ratio is Note: Round your values to four decimal places Which of the following statements are true ? Check al that apply Pellegrini Southern Inc. has less liquidity but also a greater relance on outside cash fow to finance its short-term obéigutions than LeBron Sports Equipment Inc. Ifa company's current liabilities are incressing faster tais currentassets, the company's iquidity position is weakening D An ncresse in the quici ratie ower tine usuaty meoun ht h cety beuiten s imerowing and that the compsny An increase in the quick ratio over tirne usually means that managing its short-term assets well Pellegrini Southern Inc. has a better ability to meet its mort-term Ebbities than LeB on Sports Equipment Inc. D An incrosse in the current ratio over time always means that the company's igsidity position is improvinsg

Explanation / Answer

Pallerginis current ratio = Current assets/ current liabilities = 8550/6412=1.33

Quick ratio =(Cash + Receivables)/ current liabilities = (3505+1283)/6412= 0.75

Lebron’s current ratio = Current assets/ current liabilities= 13300/8015=1.66

Quick ratio =(Cash + Receivables)/ current liabilities = (5453+1995)/8015= 0.93

Statement 1 is false since the current liabilities of Pallergini are lesser than Lebron

2 is True (Higher current liabilities as compared to assets will bring down both the current and quick ratios)

3 is True (Higher quick ratio implies that the company is having higher liquidity)

4 is False (Pallergini has lower quick and current ratios and thus lesser liquidity)

5 is True (Higher current ratio implies better liquidity)

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