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Using the balance sheet provided, what is the decimal value for the current ratio?

\begin{tabular}{|c|c|c|c|}
\hline \multicolumn{4}{|c|}{XYZ Company - Balance Sheet} \\
\hline & Assets & \multicolumn{2}{|c|}{Liabilities} \\
\hline Cash & \[tex]$35,000 & Notes & \$[/tex]45,000 \\
\hline Inventory & \[tex]$41,000 & Wages & \$[/tex]56,000 \\
\hline Property & \[tex]$124,000 & & \\
\hline & & & \\
\hline & & \multicolumn{2}{|c|}{Owner's Equity} \\
\hline & & Stock & \$[/tex]50,000 \\
\hline & & Investment & \$49,000 \\
\hline
\end{tabular}

Current Ratio = ?



Answer :

GinnyAnswer
To find the current ratio using the balance sheet provided, we need to follow these steps:

1. Identify Current Assets:
Current assets are the assets that can be converted into cash within a year. From the balance sheet, we have:
- Cash: [tex]$35,000 - Inventory: $[/tex]41,000

Therefore, the total current assets are:
[tex]\[ \text{Current Assets} = \$35,000 + \$41,000 = \$76,000 \][/tex]

2. Identify Current Liabilities:
Current liabilities are the liabilities that need to be paid within a year. From the balance sheet, we have:
- Notes: [tex]$45,000 - Wages: $[/tex]56,000

Therefore, the total current liabilities are:
[tex]\[ \text{Current Liabilities} = \$45,000 + \$56,000 = \$101,000 \][/tex]

3. Calculate the Current Ratio:
The current ratio is calculated by dividing the total current assets by the total current liabilities. Hence:
[tex]\[ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} = \frac{76,000}{101,000} \approx 0.752 \][/tex]

Therefore, the decimal value for the current ratio is approximately [tex]\(0.752\)[/tex].

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