Financial Analysis 334 Math Problem Example | Topics and Well Written Essays - 500 words

Financial Analysis 334 - mathematics Problem ExampleIn this case, if subtract the stock from current assets, still both companies can cede off their debts quite easily as their Acid-Test Ratio is equal to or greater than 1. This shows that to pay all single dollar of debt the comp both has the backing of adequate current assets. However, if we look the firms through the lens of bet Coverage Ratio and if our debt commands interest from the company than, we can clearly see that Jones company can pass much higher rates of interest. As a result, Jones Corporation wont default and will be subject to pay all its debts and hence a short-term loan should be made to Jones Corporation stipulation the two different scenarios. However, one must also state that if our loan does not command any interest, then this loan should be made to Smith Corporation.b) If we look at the sugarability condition of the two companies, we can clearly see that Jones Corporation is more profitable. This can shown by the companies greater net profit over sales ratios as compared to Smith Corporation Ratios. In the light of these ratios, Jones Corporation is earning around $7 on every $ snow worth of sales. Similarly, Smith Corporation is earning $4 on every $100 worth of sales.