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Proprietors Of Two Businesses   Unit 1 Ip   Acg230
 

Proprietors Of Two Businesses Unit 1 Ip Acg230

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Business Environment and Recording Transactions

Business Environment and Recording Transactions

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    Proprietors Of Two Businesses   Unit 1 Ip   Acg230 Proprietors Of Two Businesses Unit 1 Ip Acg230 Document Transcript

    • Running Head: PROPRIETORS OF TWO BUSINESSES<br />Business Environment and Recording Transactions<br />Carla J. McCoy<br />Unit 1 Individual Project<br />American InterContinental University<br />November 12th, 2008<br />Entity<br />I would personally be more comfortable loaning money to L.L. Sam’s Company after reviewing the balance sheets because this company has better economic resources that they will benefit from in the future. The balance sheet indicates they also have twice as much in Owners Equity than Melinda Garcia Career Services and they also have less in liabilities as well. L. L. Sam’s Company appears to be more likely to be able to repay the loan because they only have $30,000.00 in liabilities but Melinda Garcia Career Services has $174,000.00 in Liabilities. L. L. Sam’s Company has a considerable less amount in capital but more in assets. <br />Ratio<br />The Current Ratio which is a liquidity ratio that measures a company’s ability to pay short-term obligations) = Current Assets/Current Liabilities. Quick Ratio is (an indicator of a company’s short term liquidity) = Current Assets, Inventories, Prepays and Current Liabilities. After reviewing the balance sheet here are the differences between the two companies. <br />Melinda Garcia Career Services<br />Current Ratio = 19,000 / 6,000 = 3.17<br />Quick Ratio = 19,000 / 6,000 = 3.17<br />L. L. Sam’s Company<br />Current Ratio = 108,500 / 12,000 = 9.04<br />Quick Ratio = 23,500 / 12,000 = 1.96<br />Current Assets of 108,500 calculations: <br />Cash 9,000<br />AR 14,000<br />Inv 85,000<br />Supplies 500<br />Total – 108,500<br />Of course there are other Ratio’s to look into such as Debt/Asset Ratio which equals Total Liabilities / Total Assets and this indicates what proportion of equity and debt that the company is using to finance it’s assets. Then you have a Debt/Equity Ratio which equals Total Liabilities / Total Shareholder’s Equity and this indicates what proportion of equity and debt that the company is using to finance its assets. <br />References<br />Electronic Resource: https://mycampus.aiu-online.com/courses/ACG230/Assignment_Assets/ACG230_u1ips.gif<br />