a company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000. what is the company's current ratio?

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19-12-2022
Business

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a company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000. what is the company's current ratio?

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aamirmajeed5100 aamirmajeed5100 · Answer 1 · 2022-12-22T09:27:03-05:00

The current ratio of the company equals 1.44

The current ratio is a measure of a company's liquidity, or its ability to pay short-term obligations. The current ratio is calculated by dividing a company's current assets by its current liabilities. In this case, the current ratio is calculated by dividing $8,650 in current assets by $6,000 in current liabilities, which equals 1.44.

The current ratio is a measure of a company's short-term liquidity. It helps investors and creditors assess a company's ability to pay its short-term debts. A higher current ratio indicates a stronger liquidity position, while a lower current ratio indicates a weaker liquidity position.

Generally, a ratio of 1.2 or higher is considered to be good, while a ratio lower than 1.0 indicates that the company may not be able to pay its short-term obligations. Therefore, the company in this example has a good current ratio of 1.44.

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