Current Ratio – Short Answer

Practice Question

Intro to Financial Accounting
Reporting and Interpreting Financial Information
Ratio Analysis
Short Answer

ABC Corporation has a current ratio of 2.5 and current liabilities of $100,000. What is the total current assets? If the company expects a decrease in current assets to $200,000, what will be the new current ratio?

Answer +

Current Assets: $250,000

New Current Ratio: 2.0

Explanation +

Step 1: Calculate Current Assets
Current Ratio = Current Assets ÷ Current Liabilities
Current Assets = 2.5 × $100,000 = $250,000

Step 2: Calculate New Current Ratio
New Current Ratio = New Current Assets ÷ Current Liabilities
New Current Ratio = $200,000 ÷ $100,000 = 2.0