A balance sheet shows cash,$75,000;marketable securities,$115,000;accounts receivable,$150,000;and $222,500 of inventories.Current liabilities are $225,000.The current ratio is 2.5 to 1.

Question

Quizplus · Accepted Answer

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

Current assets = cash + marketable securities + accounts receivable + inventories 
Current assets = $75,000 + $115,000 + $150,000 + $222,500 = $562,500

Current ratio = current assets / current liabilities 
Current ratio = $562,500 / $225,000 = 2.5

Since the current ratio is given as 2.5 to 1, which is the same as 2.5, the statement is true.

A Balance Sheet Shows Cash,$75,000;marketable Securities,$115,000;accounts Receivable,$150,000;and $222,500 of Inventories