Question

Discount Travel has the following current assets: cash, $102 million; receivables, $94 million; inventory, $182 million; and other current assets, $18 million. Discount Travel also has the following liabilities: accounts payable, $98 million; current portion of long-term debt, $35 million; and long-term debt, $23 million. Based on these amounts, what is the current ratio?

Answer 1

Answer:

The current ratio is 2.98

Explanation:

total current assets = cash + receivables + inventory + other current assets

                                = $102 million + 94 million + 182 million + 18 million

                                = $396 million

total current liabilities = accounts payable + current portion of long term debt

                                     = $98 million + $35 million

                                     = $133 million

current ratio = current assets/current liabilities

                     = [$396 million]/[$133 million]

                     = 2.98

Therefore, The current ratio is 2.98