The current ratio is found by dividing the firm’s current assets by the firm’s current liabilities. Current liabilities include the current portion of long-term liabilities, for example, interest payments on long-term debt that will become due within the year.

The current ratio gives us an idea about a firm’s ability to cover its short-term liabilities. That is, over the year we can imagine that the firm will be selling its inventory and collecting accounts receivable and, with the cash it already has in the bank or invested in marketable securities, it will be able to use these proceeds to pay interest on its debt and pay its accounts payable when they become due.

When a firm’s current ratio goes down, we may look at this trend as potentially signaling that the firm is entering financial distress. As a result, the firm may not be able to cover its short-term liabilities as easily as before.

# Current Ratio

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### Industry Averages for Commonly Used Ratios

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### Short Term Solvency Ratios

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### Sherman's Current and Quick Ratio

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### Inventory Turnover Ratio

3. Chaka Company had no prepaid expenses and inventories remained unchanged during the year. Other selected year-end data for the company includes the following: Cost of goods sold $1,500,000 Current liabilities 1,800,000 Current ratio 3.0 to 1 Acid-test ratio 2.5 to 1 What was the company's inventory turnover ratio f

### Cash Flow Statements: Operating Cash Flow and Current Debt Ratio

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### Increased Current Ratio and Drop in Total Assets Turnover Ratio

You are a financial analyst for a pharmaceutical company and the CFO has asked you to look into the following situation. Over the past year, the company has realized an increase in its current ratio and a drop in its total assets turnover ratio. Sales have remained constant as have the quick ratio and the fixed assets turnover r

### Current ratio of Kinetics, Inc.

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### Quick Ratio, Fixed Assets, Current Ratio Changes at SVF

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### Strengthen current ratio

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? I'm choosing e because of the fact that they can pay off the long-term debt and put themselves in a position of holding onto short-term debt. Is this correct? a) Use cash to increase inventory holdings.

### Liquidity ratio current ratio and the acid test ratio

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### Deceptive Ratio Positions

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### Current Ratio and Quick Ratio

A firm's long term assets = $75,000, total assets = $200,000, inventory = $25,000 and current liabilities = $50,000 A. Current ratio = 0.5; quick ratio 1.5 B. Current ratio = 1.0; quick ratio 2.0 C. Current ratio = 1.5; quick ratio = 2.0 D. Current ratio = 2.5; quick ratio = 2.0

### BMC Corp: Calculate ratios for ROE, quick, interest coverage, current, net profit margin

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### BMC's Ratios: Calculate ROE, quick ratio, interest coverage, current ratio, profit margin

USE THE FOLLOWING INFORMATION FOR THE NEXT FIVE PROBLEMS BMC CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLLARS IN THOUSANDS) Net Sales $1025 Cost of Goods Sold 682 Gross Profit Margin 343 Depreciation 31 Operating Expense 103 Admini

### Financial information for the current ratio measure

What financial information does the current ratio measure? How does the current ratio relate to other liquidity ratios? What are some examples of fixed and variable costs in your workplace?

### MA_U10_1-5: analysis, sales % increases, quick ratio, days in inventory, current ratio

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### Comparisons of acid-test ratio and current ratio

Question is to identify the similarities/differences between acid test ratio and the current ration. Compare/describe how the two ratios meet its current obligation based on similarities/differences/and descriptions.

### Financial ratio analysis.

If I have sales, COGS, current assets and liabilities, finished goods, raw materials Work in process, LIFO and % of inventories. How do I calculate gross margin percentage, current ratio and inventory turnover?

### Inventory Amount

ABC Company has a current ratio of 3.5 to 1 and an acid-test ratio of 2.8 to 1. Current assets equal $175,000 of which $5,000 consists of prepaid expenses. ABC Company's inventory must be: A) $30,000. B) $40,000. C) $50,000. D) $35,000.

### Current Ratio Firms for Violating Agreements

ABC Corporation's current ratio is currently 1.75 to 1. The firm's current ratio cannot fall below 1.5 to 1 without violating agreements with its bondholders. If current liabilities are presently $250 million, the maximum new short-term debt that can be issued to finance an equivalent amount of inventory expansion is: A) $ 41

### Current Ratio vs. Total Assets Turnover Ratio

Over the past year, K corporation has realized an increase in its current ratio and a drop in its total assets turnover ratio. However, the company's sales, quick ratio, and fixed assets turnover ratio have remained constant. What explains these changes? Could you share some of your ideas and opinions with us?

### Calculating current ratio

Please show calculations Snowball & Company has the following balance sheet: Current assets $ 7,000 A/P & Accruals $ 1,500 Fixed assets 3,000 S-T (3-month) Loans 2,000 Common Stock 1,500

### Revenue Recording and Current Ratio

A company has borrowed $3,000,000 to expand its production plant. As a condition for the loan, the bank has required that the company maintain a Current Ratio (current assets divided by total current liabilities) of at least 1.50. On December 15th, the company comptroller reports that the costs of expansion have brought the curr

### Company loans: ethics, recording revenue, accounting principle, course of action

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### Current ratio and Quick ratio...

In Chater 29, Brealey explains how to use financial ratios to measure the financial performance of a company. He also discusses the effect of financial transactions on financial ratios. This is the question I need answered: If a company borrows a large sum of money from a bank, will the current ratio decrease or increase? When