Question

Jones Company has Cash of $600, Accounts Receivable of $500, Office Supplies of $100, and a Building with a cost of $50,000. Jones Company owes $300 on Accounts Payable and has Salaries Payable of $200. What is Jones Company's current ratio?

Answer 1

2.4

Step-by-step explanation:

Jones Company's total current assets = $600 (cash) + $500 (accounts receivable) + $100 (Office supplies) = $1,200

total current liabilities = $300 (accounts payable) + $200 (salaries payable) = $500

current ratio = $1,200 / $500 = 2.4

the current ratio measures a company's short term liquidity, or its ability to generate enough cash to pay its short term debts.