Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:

-Refer to the balance sheet above.
a.What is Little Company's current ratio now?
b.If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder,what will Little Company's current ratio be?
c.If Little Company buys a $10,000 warehouse by paying cash for the full amount,what will Little Company's current ratio be?
d.Is it ethical to structure business transactions so that the company's ratios look as good as possible?

Question

Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:

-Refer to the balance sheet above.
a.What is Little Company's current ratio now?
b.If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder,what will Little Company's current ratio be?
c.If Little Company buys a $10,000 warehouse by paying cash for the full amount,what will Little Company's current ratio be?
d.Is it ethical to structure business transactions so that the company's ratios look as good as possible?

Quizplus · Accepted Answer

The Answer of Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:

-Refer to the balance sheet above.
a.What is Little Company's current ratio now?
b.If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder,what will Little Company's current ratio be?
c.If Little Company buys a $10,000 warehouse by paying cash for the full amount,what will Little Company's current ratio be?
d.Is it ethical to structure business transactions so that the company's ratios look as good as possible?

Little Company Wants to Buy a New Warehouse