The most recent data from the annual balance sheets of Pellegrini Southern Corporation and Jing Foodstuffs Corporation are as follows:
Balance Sheet December 31st (Millions of dollars)
Jing Foodstuffs Pellegrini Southern Jing Foodstuffs Pellegrini Southern
Corporation Corporation Corporation Corporation
Assets Liabilities
Current assets Current liabilities
Cash $4,879 $3,136 Accounts payable $0 $0
Accounts receivable 1,785 1,148 Accruals 1,076 0
Inventories 5,236 3,366 Notes payable 6,096 5,737
Total current assets $11,900 $7,650 Total current liabilities $7,172 $5,737
Net fixed assets Long-term bonds 8,765 7,013
Net plant and equipment 9,350 9,350 Total debt $15,937 $12,750
Common equity
Common stock $3,453 $2,763
Retained earnings 1,860 1,487
Total common equity $5,313 $4,250
Total assets $21,250 $17,000 Total liabilities $21,250 $17,000
and equity
Pellegrini Southern Corporation’s current ratio is___, and its quick ratio is___; Jing Foodstuffs Corporation’s current ratio is___, and its quick ratio is___. Note: Round your values to four decimal places.
Which of the following statements are true?
a. Pellegrini Southern Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Jing Foodstuffs Corporation.
b. If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.
c. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.
d. Pellegrini Southern Corporation has a better ability to meet its short-term liabilities than Jing Foodstuffs Corporation.
e. An increase in the current ratio over time always means that the company’s liquidity position is improving.