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Peyton Company reported these ratios at December 31, 2018 (dollar amounts in millions): Peyton Company completed these

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Peyton Company reported these ratios at December 31, 2018 (dollar amounts in millions):

$20 = 2.00 $10 Current ratio $40 Debt ratio = 0.57 $70


Peyton Company completed these transactions during 2019:

a. Purchased equipment on account, $5

b. Paid long-term debt, $5

c. Collected cash from customers in advance, $4

d. Accrued interest expense, $3

e. Made cash sales, $7


Determine whether each transaction improved or hurt the company’s current ratio and debt ratio.

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$20 = 2.00 $10 Current ratio $40 Debt ratio = 0.57 $70

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Related Book For  answer-question
Financial Accounting

Financial Accounting

ISBN: 978-0134725987

12th edition

Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

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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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