What does a current ratio of 1.4 mean?
For each $1 of inventory, the company has about $1.40 of current liabilities. |
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For each $1 of current assets, the company has about $1.40 of current liabilities. |
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For each $1 of total assets, the company has about $1.40 of current liabilities. |
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For each $1 of current liabilities, the company has about $1.40 of current assets. |
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None of these answers are correct What does an inventory turnover ratio of 6.3 mean?
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1) We know, Current ratio is equal to current assets divided by current liabilities. So, a current ratio of 1.4 would mean for ech $1 of current assets, the company has $1.40 of current liabilities.
Answer: Option B
2) Inventory turnover ratio depicts the number of time the inventory is sold in a particular period i.e generally a year. In this question, an inventory turnover ratio of 6.3 means "the company sold its inventory approximately 6.3 times a year"
Answer: Option B
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