Question

Current ratio of company is 3.2.if debenture are redeemed by paying 120 percent,what would be its effect on current ratio

Answer 1

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

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Answer 2

Answer:

Current ratio = Current assets/liabilities. For example, a company with total debt and other liabilities of £2 million and total assets of £5 million would have a current ratio of 2.5. This means its total assets would pay off its liabilities 2.5 times.