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A business has a current ratio of 2:1. If its current liabilities are $50,000, w

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Question: A business has a current ratio of 2:1. If its current liabilities are $50,000, what are its current assets?

Options:

  1. $100,000
  2. $150,000
  3. $200,000
  4. $250,000

Correct Answer: $100,000

Solution: 

Current ratio is calculated as current assets divided by current liabilities. If the current ratio is 2:1 and current liabilities are $50,000, then current assets = 2 * $50,000 = $100,000.

A business has a current ratio of 2:1. If its current liabilities are $50,000, w

Practice Questions

Q1
A business has a current ratio of 2:1. If its current liabilities are $50,000, what are its current assets?
  1. $100,000
  2. $150,000
  3. $200,000
  4. $250,000

Questions & Step-by-Step Solutions

A business has a current ratio of 2:1. If its current liabilities are $50,000, what are its current assets?
  • Step 1: Understand what the current ratio means. A current ratio of 2:1 means that for every $1 of current liabilities, there are $2 of current assets.
  • Step 2: Identify the current liabilities. In this case, the current liabilities are $50,000.
  • Step 3: Use the current ratio to find the current assets. Since the ratio is 2:1, you multiply the current liabilities by 2.
  • Step 4: Calculate the current assets: 2 * $50,000 = $100,000.
  • Step 5: Conclude that the current assets are $100,000.
  • Current Ratio – The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.
  • Current Assets and Liabilities – Current assets are assets that are expected to be converted into cash or used up within one year, while current liabilities are obligations due within the same time frame.
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