Question

Evaluating Current Ratio-Financial Accounting

LeBronson’s Companies                 Balance Sheet                  May 31, 2018 and 2017

ASSETS 2018 2017	LIABILITIES 2018 2017
Cash 2,400 900.00	Total Current Liabilities                28,000 13,200
Short Term Invest.         28,000 9,000	Long-term Liabilities                    13,900 10,300
Accounts Receivable        7,500 5,200	Total Liabilities                             41,900 23,500
Merchandise Inventory     6,900 8,600	Stockholders’ Equity
Other Current Assets 8,000 1,500	Common Stock 11,000                       11,000
Total Current Assets 52,800 25,200	Retained Earnings 29,900                      19,700
All Other Assets 30,000 29,000	Total Equity 40,900                      30,700
Total Assets               $82,800 $54,200	Total Liabilities and Equity            82,800 54,200

LeBronson’s Companies has 10,000 common shares outstanding during 2018.

Evaluate Current Ratios

Figure out two ratios and decide.

A-Compute LeBronson’s Companies current ratio at May 31, 2018 and 2017. Which formulas are needed?

B-Based on these results did Lebronson’s Companies’ current ratio improve, worsen, or hold steady during 2018?

Answer 1

.A. LeBronson’s Companies current ratio at May 31, 2018 and 2017.

Current Ratio=(Current assets)/(Current Liabilities):

		.May 31,2018	.May 31,2017
a	Current Assets	52,800	25,200
b	Current Liabilities	28,000	13,200
c=a/b	Current Ratio	1.885714286	1.909090909

B. Based on the above results, . LeBronson’s Companies current ratio worsen during 2018 .

The Current ratio in 2018 was 1.89 against 1.91 in 2017 ,a slight reduction by 0.02