Determine the current ratio?
Question:
Determine the current ratio using the following information:
Cash$29,000
Inventory$79,000
Land$90,000
Taxes Payable$29,000
Retained Earnings$97,000
Accounts Receivable$39,000
Prepaid Insurance$ 3,000
Accounts Payable$21,000
Capital Stock $50,000
Long-term Notes Payable$43,000
Current Ratio = Current Assets divided by Current Liabilites. So you just add up all of the assets from the above list and divide it by the total of all the current liabilities from the above list.
Assetts divided by liabilities= ratio
Current Ratio = Current Assets/Current Liabilities
Current Assets above = Cash, Inventory, Accounts Receivable, and Prepaid Insurance
Current Liabilities above = Taxes Payable and Accounts Payable
(29 + 79 + 39 + 3)/(29 + 21) = 150/50 = 3
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