Question

ABC company has current assets of &9M, current liabilities of $3M, inventory of $3M, total liabilities of $12M and owners equity of 6M. Interpret your findings for the current ratio into a sentence form. Is this good or bad?

Answer 1

The current ratio is 3, which indicates that ABC company has enough current assets to cover its current liabilities.

Step-by-step explanation:

The current ratio is calculated by dividing the current assets by the current liabilities. In this case, the current assets are $9M and the current liabilities are $3M. Therefore, the current ratio is 3 ($9M/$3M).

A current ratio of 3 indicates that ABC company has $3 in current assets for every $1 in current liabilities. This is generally considered to be a good current ratio, as it suggests that the company has enough current assets to cover its current liabilities.