help calculate the current ratio for a company

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Mens clothes is a retailer of mens clothing, earned a net profit of $77000 in 2012.  knowing this, calculate the current ratio with info below:

cash-29000     inventory-79000     accounts receivable-39000     prepaid insurance-3000

taxes payable-29000     accounts payable-21000     land-90000     retained earnings-97000

capital stock-50000     longterm notes payable-43000

** I keep coming up with multiple answers, 2.16 and 3.0, based off the assets and liabilities

Sep 10th, 2015

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

Before you start grouping the current assets and liabilities its important to put aside Retained earnings and capital stock, they are the owners equity. its important to group first before calculating the current ratio

cash-29000=asset     inventory-79000=asset

     accounts receivable-39000 =asset

   prepaid insurance-3000=asset

taxes payable-29000= liability

   accounts payable-21000 =liability   

 land-90000 =asset   

 retained earnings-97000=owners equity

capital stock-50000  =owners equity 

  longterm notes payable-43000. Liabilities

just a minute and i will provide a well explained answer.. please 


Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 10th, 2015

Current Ratio = current assets / current liabilities



Sep 10th, 2015

That was different than what i came up with, is there a difference between a liability and a current liability?  

Sep 10th, 2015

if a company's operations are more than one year then those  which are treated in a fiscal year are  Current liabilities. they  include debts you owe that you expect to pay within the next 12 months. Liability is the general term reffering to total liabilities which is 

liabilities=current liabilities +long term liabilities

Sep 10th, 2015

Ask any question ready to answer you

Sep 10th, 2015

So if we just took the current assets and liabilities, would that change the outcome by chance?  with what you mentioned above, i now have

current assets = 150000

current liabilities = 50000

so a current ratio of 3 to 1?

Sep 10th, 2015

Current ratio = current assets / current liabilities


 The correct answer 


Sep 10th, 2015

thank you very much for the explanation - i was confused with current assets/liabilities and long term assets and liabilities.  thanks again

Sep 10th, 2015


Sep 10th, 2015

absolutely will do

Sep 10th, 2015

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