Question

A company's current assets are $30000 and current liabilities are $19000. Calculate the company's current ratio as a percentage. Does the company have enough assets to pay its liabilities?

Answer 1

Part 1

1.58

Part 2

the company does not have enough assets to pay its liabilities.

Step-by-step explanation:

Current ratio = Current Assets ÷ Current Liabilities

therefore,

Current ratio = $30000 ÷ $19000 = 1.58

conclusion

A current ratio of above 2.0 is usually preferred, therefore the company does not have enough assets to pay its liabilities.

Answer 2

Current Ratio (in %) = 157.89473684211% rounded off to 157.89%

The current ratio of 157.89% means that the company has 157.89% of current assets to pay off 100% or all of its current liabilities. To understand it better, we can say that to pay off every $1 of current liability, the company has $1.5789 of current assets. Thus, the company has enough current assets to pay off its current liabilities.

Step-by-step explanation:

The current ratio is a measure of liquidity of a business. It is calculated by dividing the current assets by the current liabilities of the company. To express current ratio in a percentage form, we use the following formula,

Current Ratio (in %) = [Current Assets / Current Liabilities] * 100

Current Ratio (in %) = [30000 / 19000] * 100

Current Ratio (in %) = 157.89473684211% rounded off to 157.89%