Leslie's Lizards and Serpents,LLC,owner,Karen Skink,is wrestling with whether she should close the business.The air conditioning quit on a very hot day recently causing several of the lizards to overheat and die.In addition,a child put his hand in a snake's cage and was bitten.His parents were not closely supervising him in spite of signs in the store and a verbal warning by Karen prior to the incident.The child suffered only a minor puncture wound which healed rapidly,but the parents sued Leslie's anyway.While Karen is certain she will prevail in the suit,the attorney fees and court costs have almost depleted the company finances.Leslie's rents the store space,but owns all of the cages,food,heating equipment,store displays,software,other goods sold in the store,and the animals.Which of the following will be best for Karen to use to determine if she will be able to pay the company's current liabilities?

Question

Quizplus · Accepted Answer

The current ratio would be the best choice in this case because it measures the company's ability to pay off its current liabilities with its current assets. Since Leslie's Lizards and Serpents LLC is facing financial difficulties, it is important for Karen to determine if the company has enough current assets to cover its current liabilities. The current ratio is calculated by dividing current assets by current liabilities. A ratio of 1 or greater indicates that the company has enough current assets to cover its current liabilities.

Leslie's Lizards and Serpents,LLC,owner,Karen Skink,is Wrestling with Whether She Should