How do Facebook and Twitter’s current and debt ratios compare? Original blog posting (October 6, 2016)

Compare Facebook and Twitter based on current and debt ratios

$21,652 / $1,925 = 11.25 Current ratio = Current assets / Current liabilities

$4,381,792 / $506,039 = 8.66 Current ratio = Current assets / Current liabilities

Current ratio 11.25 Current ratio 8.66

$5,189 / $49,407 = 11% Debt ratio = Total liabilities / Total assets

$2,074,392 / $6,442,439 32% Debt ratio = Total liabilities / Total assets

Debt ratio 32% Debt ratio 11%

Question 1 Which company is larger in terms of total assets?

Question 2 Calculate the current ratio for both Facebook and Twitter. What do these current ratios tell you about each company?

Question 3 Calculate the debt ratio for both Facebook and Twitter. Again, what do these ratios indicate about each company?

Question 4 Twitter has negative retained earnings. What does this mean?

Question Recap 1. Which company is larger in terms of total assets? 2. Calculate the current ratio for both Facebook and Twitter. What do these current ratios tell you about each company? 3. Calculate the debt ratio for both Facebook and Twitter. Again, what do these ratios indicate about each company? 4. Twitter has negative retained earnings. What does this mean?

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/ Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu