Heart of Texas Telecom has these account balances at December 31, 2012: Requirements 1. Compute Heart of
Question:
Requirements
1. Compute Heart of Texas Telecoms current ratio and debt ratio.
2. How much in current assets does Heart of Texas Telecom have for every dollar of current liabilities that itowes?
$ 7,800 Accounts payable 2,300 Accounts receivable 3,700 Note payable, long-term Prepaid rent Salary payable Service revenue 5,700 3,000 Cash 29,400 Depreciation expense 6,000 15,000 500 Equipment Supplies
Step by Step Answer:
Req 1 Current ratio Total current assets Total current liabilit...View the full answer
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
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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