Question

current ratio definition and how to calculate

current ratio definition and how to calculate

Homework Answers

Answer #1

Current ratio: Current ratio measures liquidity of the firm. It measures whether the firm has sufficient amount of current assets available to pay its short term obligations or current liabilities. The fomula for calculating current ratio is:

Current ratio = Current assets / Current liabilities

where, current assets are assets that will be realized or converted into cash within one year examples include cash, inventories, accounts receivable, short term investments

and current liabilities are liabilities that will be settled or paid into cash within one year, examples include accounts payable, accruals, expenses payable etc.

Usually, a current ratio of 2 is said to be satisfactory.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
price to book ratio definition and how to calculate
price to book ratio definition and how to calculate
debt-to-equity ratio definition and how to calculate
debt-to-equity ratio definition and how to calculate
price to earnings ratio definition and how to calculate
price to earnings ratio definition and how to calculate
quick ratio definition and how it is calculated
quick ratio definition and how it is calculated
inventory turnover ratio definition and how is calculated
inventory turnover ratio definition and how is calculated
1. Definition of non-current liabilities to equity ratios 2. Why this ratio increase 3. Why this...
1. Definition of non-current liabilities to equity ratios 2. Why this ratio increase 3. Why this ratio decrease
return on assets definition and how to calculate
return on assets definition and how to calculate
1. If current liabilities are $500 and the current ratio is 5. How much is current...
1. If current liabilities are $500 and the current ratio is 5. How much is current assets? 2. Current assets are $500 and the current ratio is 5. How much is current liability?
financial ratios Please calculate the following ratios Current ratio Debt to asset ratio Quick ratio and...
financial ratios Please calculate the following ratios Current ratio Debt to asset ratio Quick ratio and provide me with a small interpretation on your results
Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie...
Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie Roll. Assets Liabilities Current assets: Current liabilities: Cash and cash equivalents (Note 1) $ 4,244,190 Notes payable to banks $ 652,221 Investments (Note 1) 32,553,769 Accounts payable 6,984,075 Accounts receivable, less allowances of $750,000 and $746,000 16,226,648 Dividends payable 556,607 Inventories (Note 1): Accrued liabilities (Note 5) 9,806,534 Finished goods and work in progress 12,670,955 Income taxes payable 4,451,429 Raw materials and supplies 10,295,858...