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...
-
Weekly Corp., a December 31 year- end company that applies IFRS, acquired an investment of 1,000 shares of Credence Corp. in mid-2013 for $29,850. Between significant volatility in the markets and in...
-
Chemical vapor deposition (CVD) on an inclined susceptor: a case-study problem. An important application of convective mass transfer theory is in CVD processes employed to coat surfaces with thin...
-
Tyler Pahl recently received the following information related to Pahl Companys December 31, 2014, balance sheet. Inventory ................$ 4,100 Cash .................. 3,900 Equipment...
-
Bonds have a 7.60 percent coupon and pay interest annually. The face value is $1,000 and the current market price is $1,062.50 per bond. The bonds mature in 16 years. What is the yield to maturity?
-
Assume the government imposes a $0.75 excise tax on the sale of every 2 liter bottle of soda. The tax is to be paid by the producers of soda. The figure below shows the annual market for 2-liter...
-
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...
-
List some commonly used general controls related to IT.
-
Company's next dividend of $4.00 will be paid next year. Dividends are expected to grow by 6% per year indefinitely. If the required return on Company stock is 16%, what do we expect the market price...
-
Thunderstruck Energy is a North American oil company. Its current cost of debt is 7.43%, and the 10-year U.S. Treasury Yield is 3%. The expected return of the Market is 13.38%. The company's...
-
All Coal Mines Ltd. (ACM) a mining company is evaluating a new plant for a coal mine. The plant has a life of ten years and ACM has been given the following estimates that relate to running the new...
-
Best Buy's returns over the last 5 years are as follows: 7%, -12%, -10%, 38%, and 16%. Calculate the arithmetic average return over the 5-year span. Also calculate the variance and standard...
-
Additional Funds Needed AFN ABC Inc makes bulk purchases of ladies bags and related products. The inventories are placed in a conveniently located warehouses before shipping them to its chain of...
-
Insect means something such as a fly, an ant, a wasp, or a caterpillar. Determine whether the following are demonstrative definitions, enumerative definitions, definitions by subclass, synonymous...
-
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...
-
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,...
-
July August September October November December Total Average 350 450 460 390 390 360 4,960 413 3,020 3,500 4,020 3,290 3,170 3,070 $ 43,571 $ 3,631 PR 6-38 (Algo) Part 4 Compute the variable cost...
-
Discuss the main distinguishing features of majority, concurring, and dissenting opinions
-
On September 3, 2023, Wilkins purchased 1244 stock in Brass Corporation for $6,000. On December 31, 2023, the stock was worth $8,500. On August 15, 2024, Wilkins was notified that a. 2023-$0;...
Study smarter with the SolutionInn App