Lilly Corporation has working capital of $620,000, and Harmon Corporation has working capital of $840,000. Which of the following statements is not true?

Question

Quizplus · Accepted Answer

Just because Harmon's working capital exceeds Lilly's working capital, it does not automatically mean that Harmon is more liquid. Other factors such as size of the company and materiality will help to determine liquidity. It is possible that if Lilly Corporation is smaller than Harmon or has lower current liabilities, Lilly could be more liquid than Harmon. Option A is true for both corporations, and option B is also correct as other factors such as size and materiality would determine liquidity. Option D is also a possibility, making option C the only statement that is not necessarily true.

Lilly Corporation Has Working Capital of $620,000, and Harmon Corporation