Assets valued at $400 000 with liabilities of $300 000 means a liquidity ratio of 3 to 1.

Question

Quizplus · Accepted Answer

The liquidity ratio is calculated by dividing current assets by current liabilities, not total assets by total liabilities. The given figures do not specify if the assets and liabilities are current, nor does the calculation ($400,000 / $300,000) result in a 3 to 1 ratio; it results in a ratio of approximately 1.33 to 1.

Assets Valued at $400 000 with Liabilities of $300 000