Question

A company has current assets of 100,000, total assets of 250,000, current liabilities of 20,000, and long-term liabilities of 50,000. How much of its existing current assets can the company use to acquire equipment without allowing its current ratio to decline below 2.0 to 1

Answer 1

$60,000

Step-by-step explanation:

The computation is shown below

Here the current liabilities is $20,000

And, the current ratio is 2:1

So, as we know that

The current ratio = Current assets ÷ current liabilities

So, the current asset is $40,000

= $40,000 ÷ 20,000

= 2.0 to 1

Now the amount required to purchase an equipment is

= $100,000 - $40,000

= $60,000