3 years ago

The following financial information is taken from the balance sheets of the Peter Company and the Paul Company:

Business

1 answer:

Iteru [2.4K]3 years ago

8 0

Answer:

Current ratios:

Peter Company Answer = 5

Paul Company Answer = 2.5

Peter company has the higher liquidity than the Paul company. Its current ratio is double than the Paul's.

Explanation:

Company : Peter Paul

Current assets $200,000 $50,000

Current liabilities $40,000 $20,000

To calculate Liquidity we will us following ratio formula:

Current Ratio = Current Assets / Current Liabilities

Peter Company

Current Ratio = $200,000 / $40,000 = 5

Paul Company

Current Ratio = $50,000 / $20,000 = 2.5

Peter company has the higher liquidity than the Paul company

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