Question

If a firm's current ratio is 4, the firm could liquidate its current assets at only...

If a firm's current ratio is 4, the firm could liquidate its current assets at only ______ percent of their book value and still pay off the current liabilities in full.

insufficient information to answer; need the inventory amount

insufficient information to answer; need the dollar amounts of CA and CL

40%

25%

A current ratio has nothing to do with the question being asked

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Answer #1

Current ratio = Current assets/Current liabilites
Therefore:

If crrent assets=4X
Current liabilities =X

Percentage of liabilites as of assets=X/4X=0.25 or 25%

Hence 4th option is correct

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