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If current assets are $\$ 112,000$ and current liabilities are $\$ 56,000,$ what is the current ratio?A. 200 percentB. 50 percentC. 2.0D. $\$ 50,000$

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Chapter 5

Completing the Accounting Cycle

Section 3

Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity

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Okay, so we will understand the meaning off. Okay. However, there are various types off liquidity and efficiency ratios who assess that. How does entities working? Ok, OK, so So it is the It is the racial that shore's that How much? That whole. It's Gooding six. Okay, They're how much? Cutting a six off the and Judy have bean financed. So foreign liabilities. Okay, so although we have returned technical definition, okay, but the very take the practical application off the current rations so that it will be more clear to you. Okay, So the formula for current ratio Yes. First of all, we have current Essex on Didn't America. Okay? And current liabilities Indeed. Denominator. Now what it say's poster for before that we will understand that What is the meaning of current sex? What is the meaning of current? So the current estates are those of sex, Or we can say Are those payments which is the business entity has to recover from the customer. I didn funny a maximum. Okay. Within money in Mexico on current liabilities are those amounts which have to be paired by business and treat people, their suppliers, their vendors within one financially in Mexico. Okay, so I sex and liabilities, current assets and liabilities of those amounts which are to be deceived or big, Okay, within one financial year only. So now what business? Racial means how and what job I saves. We have or we consider. And he has created out off the current liabilities. Okay, let's suppose we have $1000 Not $1000 became $100,000. As current physics, we have to recover $100,000 from other customers because of a customer promised to pay within confidentially, okay, subsequent to the sale of perhaps to them. And we have to pay our suppliers $50,000 within one financial. So what is the current rations? Parent ratio is still no more. Do it say's what uses that we we are having during visits off dollar toe. We can save a dollar to We are happy. We had a heavy dollars to current a sex for every $1 off B. Okay, so this is what we Yeah, in Respect off Got impatient. So for the given case, what we have I ve had one buddy. Okay? In the current accepts and $56,000 in the numerator. The denominator that will give us. Okay, So that will give us who. So that matches with choice. I see. Okay, so, joy, see, is the correct answer. Okay, so we have very important definition, so you can write it so you can write all of the all of the matter is that average and so far. Okay. All right. But the correct choice is Chelsea. That's all for our solution.

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