Group Assignment Using current ratios to make comparisons
The following accounting information pertains to Adams and Hood companies at the end of 2010.
|
Account Title |
Adams |
Hood |
|
Cash |
$ 12,000 |
$ 15,000 |
|
Wages payable |
10,000 |
12,000 |
|
Merchandise inventory |
20,000 |
55,000 |
|
Building |
90,000 |
80,000 |
|
Accounts receivable |
22,000 |
25,000 |
|
Long term notes payable |
80,000 |
100,000 |
|
Land |
35,000 |
40,000 |
|
Accounts payable |
25,000 |
35,000 |
|
Sales revenue |
220,000 |
250,000 |
|
Expenses |
190,000 |
230,000 |
Required
a. Organize the class into two sections and divide each section into groups of three to five students. Assign each of the sections one of the companies.
Group Tasks
(1) Identify the current assets and current liabilities, and compute the current ratio for the particular company assigned to the group.
(2) Assuming that all assets and liabilities are listed here, compute the debt to assets ratio for the particular company assigned to the group.
Class Discussion
b. Have a representative from each section report the current ratio and debt to assets ratio for their respective companies.
c. Solicit comments regarding which company has the greater financial risk in both the short and long term.