Question

Computronics, inc. has a current ratio of 1.5. this implies that if the firm liquidates its current assets in order to pay off its current liabilities, it can sell the current assets for as little as:

Answer 1

If the figure of 1.5 represents the debt ratio of the firm then it can be inferred that the liabilities of the firm greatly exceed current assets. Without further information as to the values of Computronics, inc. current assets and liabilities the price at which the firm can sell its assets cannot be computed. However it can be stated that the firm must sell current assets at a premium of 50% of the value of the assets in order to recoup the debt of its current liabilities.