Question

Assume cash = $120, inventory = $470, accounts payable = $811, accounts receivable = $510, and total assets = $21,400. What is the current ratio?

Answer 1

1.36 times

Step-by-step explanation:

The computation of the current ratio is shown below:

Current ratio = Total Current assets ÷ total current liabilities

where,

Total current assets = Cash + inventory + account receivable

= $120 + $470 + $510

= $1,100

And the total current liabilities equal to account payable i.e $811

So, the current ratio would be

= $1,100 ÷ $811

= 1.36 times