Jill's business has current assets of $50,000 and current liabilities of $25,000. Which of the following statements is true about her company's current ratio?
A) The ratio is 50 percent and is acceptable for most industries.
B) The ratio is 2.0 and is acceptable for most industries.
C) The ratio is $25,000 and is not acceptable for most industries.
D) The current ratio cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities.

Current Ratio = Current Assets / Current Liabilities

In this case, Jill's current ratio is:

Current Ratio = $50,000 / $25,000 = 2.0

A current ratio of 2.0 is generally considered acceptable for most industries. Therefore, the correct answer is B.

Jill's Business Has Current Assets of $50,000 and Current Liabilities