Chapter 15, Problem 11CR

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Write the formulas for the current ratio and inventory turnover. (15-7)

To determine

The formula to calculate current ratio and inventory turnover.

Explanation

The formula to compute current ratio is:

Current ratio=Current assetsCurrent liabilities

For example:

Consider that current assets are $1,224,500, current liabilities are$845,430.

Compute the current ratio:

Current ratio=Current assetsCurrent liabilities

Substitute $1,224,500 for current assets, and$845,430 for current liabilities in the formula,

Current ratio=$1,224,500$845,430=1.45=1.45:1

Hence, current ratio is 1.45:1

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