If our company has current assets of $10.8 million and current liabilities of $7.2 million, what...
If our company has current assets of $10.8 million and current liabilities of $7.2 million, what is our current ratio? If you were a manager at the company, would you be satisfied with this current ratio number? Why or why not?
Homework Answers
Solution
|
Current ratio |
||||
|
Numerator |
/ |
denominator |
Current ratio |
|
|
Current assets |
/ |
Current liabilities |
Current ratio |
|
|
$ 10.80 |
/ |
$ 7.20 |
1.50 |
times |
Current ratio will be 1.50 times
.
If I were the manager of the company I would be satisfied with the current ratio of 1.50 times because a ratio of 1 is considered as ideal and the company’s ratio is more than 1 which is considered a good ratio showing a better financial stability.
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