Compute Chavez Companys current ratio using the following information. Accounts receivable . . . . . .
Question:
Accounts receivable . . . . . . . . . . . . . . $18,000
Long-term notes payable . . . . . . . . . . $21,000
Accounts payable . . . . . . . . . . . . . . . . . 11,000
Office supplies . . . . . . . . . . . . . . . . . . . . . 2,800
Buildings . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Prepaid insurance . . . . . . . . . . . . . . . . . . . 3,560
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
Unearned services revenue . . . . . . . . . . . . 3,000
Step by Step Answer:
Current assets Cash 7000 Accounts receivable 18000 Of...View the full answer
Fundamental accounting principle
ISBN: 978-0078025587
21st edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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.
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