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Which company is better to purchase and why?

A company B company
assets 10,000 25,000
cash 2,000 4,000
acct rec 50,000 80,000
equipment 11,000 18,000
supplies 22,000 34,000
total assets 95,000 161,000
liab &equity
Acct Payable 21,000 38,000
bank loan 49,000 68,000
equity 25,000 55,000
total 95,000 161,000

other data
personal withdrawals 40,000 38,000
owner's investment 16,000 32,000
capital balance 30,000 12,000

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Solution Summary

This question involves the fundamentals of accounting. The expert determines what company is better to purchase.

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Hi there,

Company A is better for the following reasons:
1. Their total liabilities are 70K compared to 106K. This means that they will be less encumbered in the future by interest payments and will have more flexibility as far as cash flow is ...

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