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WEEK 3: RATIO ANALYSIS AND LIBRARY RESEARCH TASK - Class: ACCT-301 Please name and give the...

WEEK 3: RATIO ANALYSIS AND LIBRARY RESEARCH TASK - Class: ACCT-301

Please name and give the formula for one of the liquidity ratios. Describe what this ratio can tell you.

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Answer #1

Current Ratio is one of the liquid ratios.

Current Ratio = Current Assets / Current liabilities

Where,

Current Assets = stock, debtor ,cash and bank, loans and advances, receivables and other current assets.

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Current Liability = creditors, short-term loan, bank overdraft, outstanding expenses and other current liabilities.

Current Ratio measures the financial strength of the company. It measures whether or not the firm has enough resources to meer its short-term obligations. It compares a firm's current assets to it's current liabilities. Ideal current Ratio is 2:1

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