Answer:
d. 2.83
Explanation:
Note: The financial statement in the question are merged together. They are therefore sorted before answering the question. See the attached excel file for the full question with the sorted financial statement.
The explanation to the answer is now as follows:
The current ratio is a liquidity ratio that is used in measuring whether a company has adequate resources to meet its short-term obligations or pay its liabilities from its current assets.
The current ratio provides a comparison current assets to current liabilities of a company and it can be calculated using the following formula:
Current ratio = Total current assets / Total current liabilities ................. (1)
From the 2017 balance sheet of Burnaby Mountain Trading Company, we have:
Total current assets = $1,700,000
Total current liabilities = $600,000
Substituting the values for Total current assets and Total current liabilities into equation (1), we have:
Current ratio = $1,700,000 / $600,000 = 2.83
Therefore, The firm's current ratio for 2017 is <u>2.83</u>. That is, the correct option is option d. <u>2.83</u>.
This indicates that the firm has more than enough current assets to pay off 2.83 or 283% of its current liabilities.
