Comment on the relative liquidity of the companies by

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Reference no: EM13480820

Comparative statement data for Al Sharif Company and Weber Company, two competitors, are presented below. All balance sheet data are as of December 31, 2012.


Al Sharif Company

Weber Company


2012

2012

Net sales

$450,000

$890,000

Cost of goods sold

260,000

620,000

Operating expenses

130,000

59,000

Interest expense

6,000

10,000

Income tax expense

10,000

65,000

Current assets

180,000

700,000

Plant assets (net)

600,000

800,000

Current liabilities

75,000

300,000

Long-term liabilities

190,000

200,000

Cash from operating activities

46,000

180,000

Capital expenditures

20,000

50,000

Dividends paid

4,000

15,000

Average number of shares outstanding

200,000

400,000

Instructions

(a) Compute the net income and earnings per share for each company for 2012.

(b) Comment on the relative liquidity of the companies by computing working capital and the current ratio for each company for 2012.

(c) Comment on the relative solvency of the companies by computing the debt to total assets ratio and the free cash flow for each company for 2012.

Reference no: EM13480820

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