What is the current ratio for a company with total liabilities of $48,561 and stockholders' equity of $10,158?

Rationale

0.21 is the current ratio for the company.

The current ratio is calculated by dividing total current assets by total current liabilities. In this case, however, the question provides total liabilities and stockholders' equity, which means the current ratio can be inferred based on the relationship between liabilities and equity. The calculation yields a ratio of approximately 0.21, indicating the company has limited liquidity.

A (0.83) YOUR ANSWER

This ratio suggests that the company has $0.83 in current assets for every dollar of current liabilities. To achieve this ratio, either current assets would need to be higher or current liabilities lower than what is presented, which is not supported by the given values.

B (1.47) YOUR ANSWER

A current ratio of 1.47 indicates that the company has $1.47 in current assets for every dollar of current liabilities. This also does not accurately represent the financial situation based on the provided liabilities and equity, as it suggests a stronger liquidity position than what the numbers imply.

C (1.78) YOUR ANSWER

This option implies that the company possesses $1.78 in current assets for every dollar of liabilities, reflecting a robust liquidity position. However, the figures given do not support such a scenario, as the calculated ratio is significantly lower.

D (0.21) CORRECT

This is the correct choice, as derived from the relationship between total liabilities and stockholders' equity. The current ratio of 0.21 indicates that the company has $0.21 in assets for every dollar in liabilities, revealing potential liquidity issues.

Conclusion

The current ratio analysis shows that the company is in a challenging liquidity position, with a ratio of 0.21. This suggests that for every dollar of liabilities, the company has only 21 cents in assets, highlighting a potential risk in meeting short-term obligations. All other choices reflect an overestimation of the company's financial health based on its liabilities and equity.

What is the current ratio for a company with total liabilities of $48,561 and stockholders' equity of $10,158?

0.21 is the current ratio for the company.

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