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

Question

Quizplus · Accepted Answer

To calculate the current ratio, we divide current assets by current liabilities. The current assets are the sum of cash, marketable securities, receivables, and inventories which equals $75,000 + $115,000 + $150,000 + $222,500 = $562,500. Therefore, the current ratio is $562,500 / $225,000 = 2.5 to 1. The question states that the current ratio is 2.5 to 1, which is correct based on the information given.

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