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iogann1982 [59]
4 years ago
15

ABC has the following: cash, $102 million; receivables, $94 million; inventory, $182 million; other current assets, $18 million,

Plant Property and Equipment $220 million, accounts payable, $98 million long-term debt, $23 million. Based on these amounts, what is the current ratio (round to 2 decimal points)?
Business
1 answer:
Leno4ka [110]4 years ago
3 0

Answer:

Current ratio = 4.04      

Explanation:

Current ratio measures the ability of a business to settle its short term obligations using its liquid financial resources (current assets)

<em>A current ratio in excess of 2 is considered as adequate (except for some special occasions) and vice versa</em>.

Current ratio is computed as follows:

Current ratio = current assets/current liabilities

Applying this we have

                                                                                    $

Cash                                                                          102

Receivable                                                                 94

Inventory                                                                   182

Other current assets                                                <u> 18</u>

<em>Total current assets                                                 396 </em>

<em><u>To</u></em><em>tal current liability                                                 98</em>

Current ratio=    Total current assets / T<u>o</u>tal current liability        

Current ratio = 396/98= 4.04:1                        

Current ratio = 4.04                

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