9 Current Ratio
The current ratio shows whether you have more assets or debts, or liabilities, at this time in your business. The current ratio is divided out into a decimal number. If the number is greater than 1, that means you have more assets than debts. If it is less than 1, that means you have more debts than assets. You want your current ratio to be more than 1. The formula for calculating current ratio is:
Let’s say you have a debt of $23,051.13, and you own equipment worth $32,985.01, furniture worth $1,009.25, and inventory worth $3,711.21. Your total assets are $32,985.01 + $1,009.25 + $3,711.21 = $37,705.47.
You would calculate your current ratio like this:
Your current ratio is 1.64.
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Assignment
Purpose
To practice calculating the current ratio of a business.
Outcomes
By completing this assignment, you will be able to…
- Understand what current ratio means.
- Calculate the current ratio of given businesses.
Instructions
To complete this assignment…
- Read the problems carefully and find the correct answers.
- Be sure to show how you set up each problem.
Tips for Success
To help in the completion of this assignment, make sure to:
- Read each problem carefully and understand what it is asking.
- Include how you set up each problem in order to get credit.
Current Ratio Assignment
Note: these are the same businesses we looked at in the last module. We are now going to calculate the current ratio instead of the equity.
1) Sharon owns her building, which is worth $645,785.56 and her inventory stock at this time is worth $2,465.57. She owns furniture worth $564.09 and kitchen equipment worth $3,426.56. She borrowed money to start her business, and she still owes $18,462.90, and she still owes $573,897.23 on her mortgage. She has $6,902.87 in her business bank account. What is the current ratio of her business?
2) Lloyd borrowed money to start his business, and he still owes $7,895.03. He also owes $4,231.21 on his kitchen equipment and furniture. Lloyd’s furniture is worth $573.98 and his kitchen equipment is worth $5,908.21. He has $6,871.42 in his business bank account. His inventory stock at this time is worth $764.14. What is the current ratio of his business?
3) Tanisha borrowed money to start her business, and she still owes $8,726.32. She also owes $3,245.01 on her kitchen equipment. Tanisha’s kitchen equipment is worth $4,798.68. She has $7,978.34 in her business bank account. Her inventory stock at this time is worth $1,980.23. What is the current ratio of her business?
4) Lupe owns her building, which is worth $325,871.32 and her inventory stock at this time is worth $897.29. She owns furniture worth $564.09 and kitchen equipment worth $6,798.21. She still owes $213,890.64 on her mortgage. She has $6,492.11 in her business bank account. Her inventory stock at this time is worth $2,354.23. What is the current