frank collins observes the following data for two companies 604352

Frank Collins observes the following data for two companies:

Which of the following choices best describes reasonable conclusions that Collins might make about the two companies’ ability to pay their current and long – term obligations?

a. Company A’s current ratio of 4.0x indicates it is more liquid than Company B, whose current ratio is only 1.2x, but Company B is more solvent, as indicated by its lower debt – to – equity ratio.

b. Company A’s current ratio of 25 percent indicates it is less liquid than Company B, whose current ratio is 83 percent, and Company A is also less solvent, as indicated by a debt – to – equity ratio of 200 percent compared with Company B’s debt – to – equity ratio of only 30 percent.

c. Company A’s current ratio of 4.0x indicates it is more liquid than Company B, whose current ratio is only 1.2x, and Company A is also more solvent, as indicated by a debt – to – equity ratio of 200 percent compared with Company B’s debt – to – equity ratio of only 30 percent.

The data below appear in the five – year summary of a major international company. A business combination with another major manufacturer took place in 2003. The term turnover in this financial data is a synonym for revenue.