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Twitter And Facebook

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Financial Analysis Project Name______________________
Answer Sheet
SHOW ALL YOUR WORK
1. Calculate the 2020 (year ended 12/31/20) current ratio for Twitter. ( 6 pts)
Current ratio=Current assets/current liabilities
In 2020, Twitter’s current assets was $8,637,000,000
Twitter’s current liabilities was $1,953,000,000
Therefore: Twitter’s current ratio=$8,637,000,000/$1,953,000,000
=4.422
2. Calculate the 2020 (year ended 12/31/2020) current ratio for Facebook. (6 pts)
Current ratio=Current assets/current liabilities
In 2020, Facebook’s current assets was $75,670,000,000
Facebook’s current liabilities was $14,981,000,000
Therefore: Facebook’s current ratio=$75,670,000,000/$14,981,000,000
=5.051
3. Which company has a better current ratio and why? Explain in a short paragraph.
( 4 pts)
The current ratio is a liquidity ratio used to measure a company's ability to pay its short-
term debts or obligations that are due within one year. It also informs potential investors
of the firm's ability to maximize its current assets in satisfying its current debt without
borrowing more money to settle such obligations. A company with a higher current ratio
is seen to be highly liquid and, therefore, will have no problem paying its short-term
debts. From the two calculations above, it's evident that Facebook has a better current
ratio than Twitter because its current ratio stands at 5.051 against Twitter, which is 4.422.

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4. Calculate the 2020 accounts receivable turnover ratio for Twitter. Note: Be sure
to average the beginning and ending AR first, before calculating the final ratio. (6
pts.
Accounts receivable turnover ratio=Net credit sales/average account receivable
Net credit sales= Sales-cost of sales
Average receivable= Closing receivable+opening recievable/2
In 2020, Twitter’s sales was $3,716,000,000
Twitter’s cost of sale=$1,366,000,000
Therefore: Twitter’s net sales=$3,716,000,000-$1,366,000,000
=$2,350,000,000
In 2020, Twitter’s opening receivable was $850,000,000
Twitter’s closing receivable was $1,042,000,000
Therefore; Twitter’s average receivable=($850,000,000+$1,042,000,000)/2
=$521,425,000
But Account receivable turnover ratio=Net sales/average receivable
=$2,350,000,000/$521,425,000
Therefore; Twitter’s account receivable turnover ratio=4.5
5. Calculate the 2020 accounts receivable turnover ratio for Facebook. Note: Be
sure to average the beginning and ending AR first, before calculating the final
ratio. (6 pts)
In 2020, Facebook’s sales was $85,965,000,000
Facebook’s cost of sale=$16,692,000,000

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Financial Analysis Project Answer Sheet Name______________________ SHOW ALL YOUR WORK☺ 1. Calculate the 2020 (year ended 12/31/20) current ratio for Twitter. ( 6 pts) Current ratio=Current assets/current liabilities In 2020, Twitter’s current assets was $8,637,000,000 Twitter’s current liabilities was $1,953,000,000 Therefore: Twitter’s current ratio=$8,637,000,000/$1,953,000,000 =4.422 2. Calculate the 2020 (year ended 12/31/2020) current ratio for Facebook. (6 pts) Current ratio=Current assets/current liabilities In 2020, Facebook’s current assets was $75,670,000,000 Facebook’s current liabilities was $14,981,000,000 Therefore: Facebook’s current ratio=$75,670,000,000/$14,981,000,000 =5.051 3. Which company has a better current ratio and why? Explain in a short paragraph. ( 4 pts) The current ratio is a liquidity ratio used to measure a company's ability to pay its shortterm debts or obligations that are due within one year. It also informs potential investors of the firm's ability to maximize its current assets in satisfying its current debt without borrowing more money to settle such obligations. A company with a higher current ratio is seen to be highly liquid and, therefore, will have no problem paying its short-term debts. From the two calculations above, it's evident that Facebook has a better current ratio than Twitter because its current ratio stands at 5.051 against Twitter, which is 4.422. 4. Calculate the 2020 accounts receivable turnover ratio ...
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