Before approving credit the office manager calls the bankreference provided by Nocturnal, and learns that the companycurrently has a cash balance of $200. When she asks Nocturnal aboutthe $11,800 discrepancy Nocturnal explains that the financialinformation includes the anticipated (but as yet unrealized) profitof $11,800 on a job under bid. Nocturnal`s accountant explains thatthe company keeps its books according to Contingent RealityAccounting Principles.
The office manager reviews financial statements for the companyand adjusts them to GAAP:
Cash200 Short-term Liabilities 2,000
Total Assets3,700 Total Liabilities 5,000
1) What is Nocturnal’s ratio of cash to short-termliabilities?
2) What is its Debt to Assets ratio?
3) What is Nocturnal’s stockholders’ equity?
4) Do lenders or owners appear to have a great interest in theassets of Nocturnal? Explain.
