Let’s make up some numbers: Say Quick A = 5/2 = 2.5 Quick B = 6/2 = 3 CA/CL A = 7/2 = 3.5 CA/CL B = 7/2 = 3.5 So, based on Quick, A has lower receivables, B has higher But CA A has an increase of 2 (in the numerator) from Quick A, vs CA B increases only 1, so A has more inventory. Did I do that right?
amberpower Wrote: ------------------------------------------------------- > Let’s make up some numbers: > > Say Quick A = 5/2 = 2.5 Quick B = 6/2 = 3 > CA/CL A = 7/2 = 3.5 CA/CL B = 7/2 = > 3.5 > > So, based on Quick, A has lower receivables, B has > higher > > But CA A has an increase of 2 (in the numerator) > from Quick A, vs CA B increases only 1, so A has > more inventory. > > Did I do that right? If you are going to make up numbers, then why not make up numbers that give you your desired ratios.
I say A - inventories are the only item that is not there in the quick ratio compared to the current ratio
@san: inventories and receveibles are the two variables that can be tuned…
I’m not giving clearence here:) I rested my point. Current ratio 1=Current ratio 2 eliminate the denominator from both=> CA1=CA2 Quick ratio 1 < Quick ratio 2 eliminate the denominator from both CA1-Inventory1 < CA2-Inventory 2=> inventory 1> Inventory 2, answer is A
A
I have no idea what the question is… but Company A has higher inventories and company b has higher A/R…
cfaisok Wrote: ------------------------------------------------------- > @san: > > inventories and receveibles are the two variables > that can be tuned… Over from Level II. Company 1 has more inventory & less AR, and company B has more AR and less Inventory. Cash for both: 4 Securities for both: 1 AR : 1 & 2, repectively Inventory: 15 & 14, repectively CL for both: 10 Current ratio: 2.1 & 2.1 Cash: .4 & .4 Quick A: .6 Quick B: .7 Since it is given in decimals.it is easy to assume CL to be 10. Anish
am convinced, but how to do that in 50 sec? (the other 40 i need to read) It’s really basic algebra… Am upset, that I made mistakes…
cfaisok Wrote: ------------------------------------------------------- > am convinced, > but how to do that in 50 sec? (the other 40 i need > to read) > > It’s really basic algebra… > > Am upset, that I made mistakes… As I said, keep the denominator 10. It helps. Anish
Okay, I dropped in from LII per your request, although to be honest, this isn’t LII material so I don’t know why you would ask us. Anyhow, since I’m here, the first company has relatively smaller A/R and larger INV. The second company has relatively larger A/R and smaller INV. The lack of an actual question above the data left me unsure which was relative to which, but what I gave you should be enough to figure it out.
B has more receivables and thus a higher QR.