Rosewood Company had Current Assets of $582, Current Liabilities of $433, Total Assets of $732, and only Current Liabilities are Total Liabilities. If Rosewood executes a note for $500 for six months, what is the new current ratio?

Question

Quizplus · Accepted Answer

The current ratio is calculated as Current Assets divided by Current Liabilities. Initially, the current ratio is $582 / $433 = 1.34. After executing a note for $500, Current Liabilities increase to $933 ($433 + $500), and Current Assets remain $582. The new current ratio is $582 / $933 = 0.62.

Rosewood Company Had Current Assets of $582, Current Liabilities of $433