How to Calculate Curren Ratio

label Business
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schedule 1 Day
account_balance_wallet $5

Judith Corp. has current assets worth $50,000 and current liabilities worth $75,000. Current assets include inventory of $10,000. Calculate current ratio.

Jul 27th, 2015

Thank you for the opportunity to help you with your question!

Current assets 50,000

Current liabilities 75000

inventory is 10,000.

Therefore total current assets = 50,000 + 10,000

                                                =60,000


Current Ratio= Current assets/current liabilities

                      =60,000/75000

                       =0.8

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 27th, 2015

In the question it states "current assets include inventory of $10,000" does that mean inventory dollar amount is already included in the current assets of $50,000? 

Jul 27th, 2015

No. what they mean is that the Inventory is usually a part of the current assets. They decided to put the two aside because many students are usually confused on whether to include the Inventory in the current assets. So the approach to such questions is usually to add the inventory amount first to the current assets not unless it has been clearly stated in the amount that the current assets are inclusive of the inventory amount

Jul 27th, 2015

Oh okay. Thank you so much!! :)

Jul 27th, 2015

You are welcome Iijulsii. It's been a pleasure

Jul 27th, 2015

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