Question

If current assets amount to $62,000, total assets $350,000, current liabilities $31,000, and total liabilities $125,000, then the current ratio is

a. 2.8 to 1
b. 0.5 to 1
c. 2.0 to 1
d. 3.0 to 1

Answer 1

The current ratio is calculated by dividing current assets by current liabilities. In this case, with current assets of $62,000 and current liabilities of $31,000, the current ratio is 2.0 to 1.

Step-by-step explanation:

The student is asking about the current ratio, which is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. The current ratio is calculated by dividing current assets by current liabilities.

In this scenario:

• Current Assets = $62,000
• Current Liabilities = $31,000

Therefore, the current ratio is:

Current Ratio = Current Assets / Current Liabilities = $62,000 / $31,000 = 2.0 to 1

The correct answer to the question is c. 2.0 to 1.