A company's current ratio is 1.4; its current liabilities are $55,000; its long-term liabilities are $150,000; its property, plant, and equipment are $275,000; cash is $25,000, and inventories are $33,000. Its accounts receivables are $19,000 if there are no other current assets.
Calculating the present-day ratio may be very truthful: virtually divide the business enterprise's cutting-edge property by way of its contemporary liabilities. Modern properties are those that may be transformed into cash within twelve months, while modern liabilities are duties anticipated to be paid within 365 days.
The modern ratio is used to assess a company's capability to pay its quick-time period responsibilities, which include money owed payable and wages. It is calculated by dividing modern property via cutting-edge liabilities. The higher the end result, the stronger the economic role of the corporation.
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