What is the current ratio and how is it calculated?
Question:
Step by Step Answer:
The current ratio is a type of liquidity ratio that measures ...View the full answer
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
Students also viewed these Accounting questions
-
How would the following transactions affect the current ratio and the acid-test ratio? (a) Purchase of inventory with cash; (b) Sale of inventory for more than its cost. Assume that prior to these...
-
What is the current ratio if a companys short-term asset balance is $135,000,000 and its short-term liabilities balance is $60,000?
-
What is the contribution margin ratio and how is it used?
-
If A and B are mutually exclusive events and P(A) = 0.2 and P(B) = 0.7, then P(A and B) is?
-
Jason Equipment Ltd. issued 10%, five-year bonds with a face value of $2,800,000 on October 1, 2011. The bonds were issued at par and pay interest on April 1 and October 1 each year. The company's...
-
A Belgian manufacturer of tennis balls is noted for making all its tennis balls exactly the same. The manufacturer, however, is less certain about its costs. The manufacturer has not changed its...
-
Question: Hortense and Gus are each starting a business. Hortense's business is an Internet startup. Gus will be opening a yarn store. Hortense needs millions of dollars in venture capital and...
-
Smith and Jones, Inc. is primarily engaged in the worldwide production, processing, distribution, and marketing of food products. The following information is from its 2009 annual report: Required a....
-
. Question 2 of 2 > 5 / 10 ... (b) Assuming that perpetual records are maintained and they tie into the general ledger, calculate the ending inventory using (1) FIFO and (2) LIFO. (1) (2) FIFO LI...
-
A retail property was acquired on April 12 of year one with $7,250,000 of cash and $4,500,000 of debt. The mortgage was a 20-year term, 4.75% fixed rate, fully amortizing. No loan fees because the...
-
What types of accounts are listed on the post-closing trial balance?
-
Answer the following questions: Requirements 1. What type of normal balance does the Retained Earnings account have debit or credit? 2. Which type of income statement account has the same type of...
-
What is the output of the following application? A. 5 bent! B. 5.0 bent! C. The code does not compile because Bend is not a functional interface. D. The code does not compile because of the apply( )...
-
What type of algorithm is the following code? 1-0 while i
-
A 1.80 kg ball is sitting at the bottom of a hill. Feeling playful, you decide to push it as hard as you can. You push the ball towards the base of the hill and give it 95.0 J of kinetic energy....
-
You purchase one Apple Tree Inc February 115 call contract for a premium of $7.00. You hold the option until the expiration date when Apple Tree stock sells for $108.14 per share. Calculate gain/loss...
-
You purchase one Apple Tree Inc July 100 call contract for a premium of $6.36. You hold the option until the expiration date when Apple Tree stock sells for $128.30 per share. Calculate gain/loss...
-
You write one Baltimore Cloud Inc. August 120 call option contract for a premium of $4.58. You hold the position until the expiration date when Baltimore Cloud stock sells for $99.44 per share....
-
A 1000-liter tank contains 500 L of water with a salt concentration of 10 g/L. Water with a salt concentration of 50 g/L flows into the tank at a rate of Rin = 80 L/min. The fluid mixes...
-
Continuation of Exercise 4-83. (a) What is the probability that the first major crack occurs between 12 and 15 miles of the start of inspection? (b) What is the probability that there are no major...
-
A Bingham fluid of viscosity, \(\mu\), and yield stress, \(\tau_{0}\), flows through a horizontal pipe of radius, \(R\), and length, \(L\). The flow is driven by a pressure drop, \(\Delta P / L\)...
-
The unadjusted trial balance of Walton Anvils at December 31, 2018, and the data for the adjustments follow: Adjustment data: a. Unearned Revenue still unearned at December 31, $1,800. b. Prepaid...
-
On December 1, Bob Waldo began an auto repair shop, Waldo's Quality Automotive. The following transactions occurred during December: Dec. 1 Waldo contributed $70,000 cash to the business in exchange...
-
The unadjusted trial balance and adjustment data of Martha's Motors at December 31, 2018, follow: Adjustment data at December 31, 2018: a. Depreciation on equipment, $2,100. b. Accrued Wages Expense,...
-
Accounting harmonisation involves: Select one: a. Increased lobbying on proposed accounting standards b. Convergence of practices c. Adoption of one set of standards across the globe without any...
-
All of these are characteristics of a leveraged buyout except- A. Issue AAA rated equity securities B. borrow money (use debt) C. Use target company's assets and cash flow as collateral D. Take the...
-
Chapter 10 Homework Match the following terms with their definitions (not every letter is used) 1. 2. 3. 4. 5. Outstanding stock Paid-in Capital Authorized stock Treasury stock Issued stock a. The...
Study smarter with the SolutionInn App