Question

Philippe Organic Farms has total assets of $689,400, long-term debt of $198,375, total equity of $364.182, net fixed assets of $512,100, and sales of $1,021,500. The profit margin is 6.2 percent. What is the current ratio?
A. 1.26
B. 1.40
C. .95
D. 1.12
E. 1.50

Answer 1

Answer:

correct option is  B. 1.40

Explanation:

given data

total assets = $689,400

long-term debt = $198,375

total equity = $364.182

net fixed assets = $512,100

sales = $1,021,500

profit margin = 6.2 percent

solution

we get here first current assets that is express as

current assets = Total assets - net fixed assets   ...................1

put here value

current assets = $689,400 - $512,100

current assets = $177300

and now we get Current liabilities that is express as

Total liabilities  = Total assets - Total equity .............2

Current liabilities + Long term debt = Total assets - Total equity    

Current liabilities = Total assets - Total equity - Long term debt ...........3

put here value

Current liabilities = $689400 - $364182 - $198,375

Current liabilities = $126843  

so here Current ratio will be

Current ratio = current assets ÷ Current liabilities  .............4

Current ratio = $\frac{177300}{126843}$  

Current ratio = 1.40

so correct option is  B. 1.40