Data from Gofman Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,300 and the cost of goods sold was $900.
-The current ratio at the end of Year 2 is closest to:
A) 0.32
B) 0.72
C) 2.78
D) 0.23

Question

Data from Gofman Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,300 and the cost of goods sold was $900.
-The current ratio at the end of Year 2 is closest to:
A) 0.32 
B) 0.72 
C) 2.78 
D) 0.23

Quizplus · Accepted Answer

We need to calculate the current ratio, which is Current Assets / Current Liabilities.

From the balance sheet: 
Current Assets = $400 + $200 = $600 
Current Liabilities = $150 + $50 = $200

Therefore, current ratio = $600 / $200 = 3

Since the current ratio has increased from the previous year, it indicates that the company's liquidity has improved. The best option is C because it is the closest answer choice to 3.

Data from Gofman Corporation's Most Recent Balance Sheet Appear Below