Calculate the current ratio and the acid-test ratio. Is the company healthy based on the guidelines given in the text?
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A)Current ratio = 1.37 which is too low Acid-test ratio = 2.88 which is fine
B)Current ratio = 2.11 which is fine Acid-test ratio = 1.37 which is too low
C)Current ratio = 2.88 which is fine Acid-test ratio = 2.11 which is fine
D)Current ratio = 2.88 which is fine Acid-test ratio = 1.37 which is fine

Question

Calculate the current ratio and the acid-test ratio. Is the company healthy based on the guidelines given in the text?
-
A)Current ratio = 1.37 which is too low Acid-test ratio = 2.88 which is fine 
B)Current ratio = 2.11 which is fine Acid-test ratio = 1.37 which is too low 
C)Current ratio = 2.88 which is fine Acid-test ratio = 2.11 which is fine 
D)Current ratio = 2.88 which is fine Acid-test ratio = 1.37 which is fine

Quizplus · Accepted Answer

The current ratio is 2.88 which is above the recommended industry guideline of 2, indicating the company has enough current assets to meet its current liabilities. The acid-test ratio is also 1.37 which is above the recommended industry guideline of 1, indicating the company has enough quick assets to cover its current liabilities. Therefore, the company is healthy based on the guidelines given in the text.

Calculate the Current Ratio and the Acid-Test Ratio