Purchase Solution

Analyzing the Effects of Current Ratio

Not what you're looking for?

Ask Custom Question

Gil Corporation has current assets of $90,000 and current liabilities of $180,000.

Required: Compute the effect of each of the following transactions on Gil's current ratio:

1. Refinancing a $30,000 long-term mortgage with a short-term note.
2. Purchasing $50,000 of merchandise inventory with short-term account payable.
3. Paying $20,000 of short-term accounts payable.
4. Collecting $10,000 of short-term accounts receivable.

Purchase this Solution
Solution Summary

This solution is comprised of 105 words and discusses the effects of a transaction on the current ratio. All required calculations and equations are included.

Solution Preview

Current Ratio= Current Assets/Current liabilities
=90000/180000 =0.5

Effect of Transaction on Gil's current ratio:
1. Short term note that is current liabilities will increase by 30000 therefore ...

Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

View More Free Quizzes
Related BrainMass Solutions

  • Financial Cycle Audit

    b.completeness assertion. 17.Analyzing ratio results relative to expectations based on prior year, budgeted, or other data relates to: a.initial procedures. b.analytical procedures. c.tests of details of transactions.

  • Analyzing Financial Statements with ratios, break even

    Using XYZ Corporation guide, calculate the following for each year (2002, 2003 and 2004): Current ratio = Long-term solvency ratio = Contribution ratio = Management/expense ratio = Revenue/expense ratio = For the program suggested in the attachment

  • Analysingf financial statements of Pepsi & coco cola

    vi) Current cash debt coverage. c) Compute the following solvency ratios for each of the companies, and comment on the relative solvency of the two competitors. i) Debt to total assets ratio. ii) Times interest earned.

  • Brewster Company: Using ratio analysis

    445970 Brewster Company: Using ratio analysis, compute ending inventory Brewster Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal $200,000, of which $10,000 is prepaid expenses.

  • Multiple choice questions / T or F regarding working capital

    current ratio c. current-assets-to-total-assets ratio d. current-assets-to-sales ratio 2. Which of the following best illustrates the importance of a working capital strategy?

  • Analyzing the ability to pay liabilities

    483023 Analyzing the ability to pay liabilities Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012.

  • Insurance Evaluation: How to gather and analyze data

    We assume the insurance industry needs a great deal of liquidity in order to meet crises that occur fairly frequently: storms, flooding, for example. Both the current ratio and the cash ratio might make for good comparisons.

  • Financial ratios and a comparison of the ratios

    Current ratio measures the liquidity position of the organization. It indicates the ability to pay the short term obligations of the organization. It is computed by Current Assets/Current Liabilities.

  • Financial reporting question

    Indicate the effects of the previous transactions on each of the following: total current assets, total current liabilities, net working capital, and current ratio.

View More Related Solutions