Asked by Seema AlHiraki on May 25, 2024
Verified
Paul Company has $17,000 in cash, $3,000 in marketable securities, $36,000 in current receivables, $24,000 in inventories, and $45,000 in current liabilities. The company's current ratio is closest to:
A) 0.44 to 1.
B) 0.80 to 1.
C) 1.78 to 1.
D) 1.24 to 1.
Current Ratio
A financial metric assessing a firm's capacity to settle debts due within a year by comparing its current assets to its current liabilities.
- Acquire knowledge about the parts and interpretation of balance sheets and income statements.
- Assess and explain financial proportions such as the current ratio, acid-test ratio, and average collection period.
Verified Answer
MA
Melissa AliottaMay 28, 2024
Final Answer :
C
Explanation :
The current ratio is calculated as Current Assets / Current Liabilities. For Paul Company, Current Assets = $17,000 (cash) + $3,000 (marketable securities) + $36,000 (current receivables) + $24,000 (inventories) = $80,000. Current Liabilities = $45,000. Therefore, the current ratio = $80,000 / $45,000 = 1.78 to 1.
Learning Objectives
- Acquire knowledge about the parts and interpretation of balance sheets and income statements.
- Assess and explain financial proportions such as the current ratio, acid-test ratio, and average collection period.