A Liquidity Ratios Look at the following current asset and l

A.

Liquidity Ratios Look at the following current asset and liability data for Beaches Resorts (BR) and choose the correct conclusion:

BR is less liquid than the industry average according to both the current and quick ratio.

BR is more liquid than the industry average according to both the current and quick ratio.

BR is less liquid than the industry average according to the current ratio but more liquid according to the quick ratio.

BR is more liquid than the industry average according to the current ratio but less liquid according to the quick ratio.

B.

Market Value Ratios Stock A has a ROE of 10%, Stock B has an ROE of 10%. The price to book ratio for A is 1.55 and the same ratio for B is 1.82. If both stocks are equal risk, according to the earnings yield which stock is the better buy?

One can\'t compute the earnings yield from the data given

Stock A

Stock B

Both stocks have identical earnings yield

Solution

Beaches Resorts (BR)

Current Assets = Cash + Securities + Receivables + Inventory = 95+215+435+567 = 1312

Current Liabilities = Payables + Bank notes + Other = 505+350+170 = 1025

Quick Assets = Cash + Securities + Receivables = 95+215+435 = 745

Current Ratio = 1312 / 1025 = 1.28 ; Quick Ratio = 745 / 1025 = 0.726

BR is less liquid than the industry average according to both the current and quick ratio.

If both stocks are equal risk, according to the earnings yield which stock is the better buy?

One can\'t compute the earnings yield from the data given