Question

Kramer Industries has cash of $37,000; net Accounts Receivable of $50,000; short - term investments of $24,000 and inventory of $32,000. It also has $20,000 in current liabilities and $60,000 in long - term liabilities. What is the current ratio for Kramer Industries?

A. 1.33
B. 5.55
C. 3.00
D. 7.15

Answer 1

The current ratio for Kramer Industries is D. 7.15.

Step-by-step explanation:

The current ratio measures a company's ability to pay off its short-term liabilities using its short-term assets. It is calculated by dividing the company's current assets by its current liabilities.

To find the current ratio for Kramer Industries, we add up their cash, net accounts receivable, short-term investments, and inventory, which gives us a total of $143,000.

Next, we divide this total by their current liabilities of $20,000, giving us a current ratio of 7.15. Therefore, the correct option is D. 7.15.