Jill's business has current assets of $50,000 and current liabilities of $25,000.Which statement is true about the company's current ratio?
A)The ratio is 50% and is acceptable for most industries.
B)The ratio is 2 and is acceptable for most industries.
C)The ratio is $25,000 and is not acceptable for most industries.
D)Current ratio can not be determined from the information given.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. In this case, the current ratio would be:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $50,000 / $25,000
Current Ratio = 2

A current ratio of 2 is generally considered acceptable for most industries. Choice A is incorrect because the current ratio is not a percentage. Choice C is incorrect because the current ratio is not a dollar amount. Choice D is incorrect because the information given is sufficient to calculate the current ratio.

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