Current assets and current liabilities for Sandstone Properties Company follow: a. Determine the working capital and current
Question:
Current assets and current liabilities for Sandstone Properties Company follow:
a. Determine the working capital and current ratio for 20Y9 and 20Y8.
b. Is the change in the current ratio from 20Y8 to 20Y9 favorable or an unfavorable?
20Υ9 20Υ8 Current assets $2,133,800 $1,613,300 Current liabilities 940,000 730,000
Step by Step Answer:
a We know Working Capital WC CA Current Assets CL Current Liabi...View the full answer
Accounting
ISBN: 9781337902687
28th Edition
Authors: Carl S. Warren, Christine Jonick, Jennifer Schneider
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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