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Selected Balance Sheet and Income Statement Information for Two Manufacturing

Question 54

Essay

Selected balance sheet and income statement information for two manufacturing companies: Stripe, Inc. and Polka-dot Corporation follows:
 Stripe  (in $ millions)  Polka-dot  (in $ millions)  Cash $1,860$26,558 Marketable securities 380110 Accounts receivable 3,46038,424 All other current assets 4,30639,986 Total current liabilities 7,296129,009 Total liabilities 9,592148,564 Total equity 12,060121,551 Pre-tax income 1,28018,830 Interest expense 1051,791\begin{array}{|c|c|c|}\hline & \begin{array}{c}\text { Stripe } \\\text { (in } \$ \text { millions) }\end{array} & \begin{array}{l}\text { Polka-dot } \\\text { (in } \$ \text { millions) }\end{array} \\\hline \text { Cash } & \$ 1,860 & \$ 26,558 \\\hline \text { Marketable securities } & 380 & 110 \\\hline \text { Accounts receivable } & 3,460 & 38,424 \\\hline \text { All other current assets } & 4,306 & 39,986 \\\hline \text { Total current liabilities } & 7,296 & 129,009 \\\hline \text { Total liabilities } & 9,592 & 148,564 \\\hline \text { Total equity } & 12,060 & 121,551 \\\hline \text { Pre-tax income } & 1,280 & 18,830 \\\hline \text { Interest expense } & 105 & 1,791 \\\hline\end{array}
a. Calculate the current ratio and quick ratio for both companies.
b. Which company is more liquid?
c. Calculate the times-interest-earned ratio and debt-to-equity ratio for both companies.
d. Which company is more solvent?

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blured image b. Both companies are liquid, but Strip...

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