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

Question

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The current assets total $562,500 ($75,000 + $115,000 + $150,000 + $222,500). The current ratio is calculated by dividing current assets by current liabilities, which results in 2.5 ($562,500/$225,000 = 2.5).

A Balance Sheet Shows Cash, $75,000; Marketable Securities, $115,000; Receivables