Question

23. The schedule of changes in working capital is prepared with the help of
(1) current assets
(2) current liabilities
(3) current assets and current liabilities
(4) non-current assets and non-current liabilities​

Answer 1

Answer:

Current Ratio Formula

The Current Ratio formula is:

Current Ratio = Current Assets / Current Liabilities

 

Example of the Current Ratio Formula

If a business holds:

Cash = $15 million

Marketable securities = $20 million

Inventory = $25 million

Short-term debt = $15 million

Accounts payables = $15 million

 

Current assets = 15 + 20 + 25 = 60 million

Current liabilities = 15 + 15 = 30 million

Current ratio = 60 million / 30 million = 2.0x