Section 4. Liquidity Ratios
Q24. Current ratio
How is the current ratio calculated?
= Current assets / Current liabilities
Current assets = $2,736,000
Current liabilities = $1,800,000
= $2,736,000 / $1,800,000 = 1.52
Current assets = $2,842,000
Current liabilities = $2,900,000
= $2,842,000 / $2,900,000 = 0.98
Entity 24-a is better prepared with current assets to pay current liabilities than is Entity 24-b.