The financial statements for Lexington Service Company include the following items: $$\begin{array} { l r r }
& 2017 & 2016 \
\text { Cash } & \$ 52,500 & \$ 49,000 \
\text { Short-term Investments } & 33,000 & 20,000 \
\text { Net Accounts Receivable } & 52,000 & 51,000 \
\text { Merchandise Inventory } & 160,000 & 46,000 \
\text { Total Assets } & 534,000 & 553,000 \
\text { Accounts Payable } & 129,500 & 126,000 \
\text { Salaries Payable } & 25,000 & 14,000 \
\text { Long-term Note Payable } & 58,000 & 55,000
\end{array}$$ Compute the current ratio for 2016.(Round answer to two decimal places. )

Question

The financial statements for Lexington Service Company include the following items: $$\begin{array} { l r r } 
& 2017 & 2016 \
\text { Cash } & \$ 52,500 & \$ 49,000 \
\text { Short-term Investments } & 33,000 & 20,000 \
\text { Net Accounts Receivable } & 52,000 & 51,000 \
\text { Merchandise Inventory } & 160,000 & 46,000 \
\text { Total Assets } & 534,000 & 553,000 \
\text { Accounts Payable } & 129,500 & 126,000 \
\text { Salaries Payable } & 25,000 & 14,000 \
\text { Long-term Note Payable } & 58,000 & 55,000
\end{array}$$ Compute the current ratio for 2016.(Round answer to two decimal places. )

Quizplus · Accepted Answer

The current ratio is a measure of a company's ability to pay its short-term obligations. It is calculated by dividing current assets by current liabilities. In this case, the current ratio for 2016 is 553,000 / 126,000 = 4.39.

The Financial Statements for Lexington Service Company Include the Following