Question

Colorado Corporation's financial statements include the following information:

Cash $ 6,100
Net Credit Sales $315,000
Accounts receivable 52,000
Cost of Goods Sold 210,000
Merchandise inventory 92,800
Net Income $ 56,000
Prepaid Expenses 12,600
Total Current Assets $163,500
Total Current Liabilities $ 65,400
Total Stockholders' Equity $200,000

The Current Ratio for Colorado Comapny is:

Answer 1

2.5 times

Step-by-step explanation:

The computation of the current ratio is shown below:

As we know that

Current ratio = Total Current assets ÷ total current liabilities

So by applying the formula, the current ratio is

= $163,500 ÷ $65,400

= 2.5 times

It shows a relationship between the current assets and the current liabilities plus it always expressed in times form