Assume a Company Has a Current Ratio of 1

question 1

Multiple Choice

Assume a company has a current ratio of 1.5 and working capital equal to $25,000.If the company's current liabilities are equal to $50,000,its total current assets are:

• A) $7,500
• B) $25,000
• C) $75,000
• D) $37,500

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Market Price

The existing rate for buying or selling a product or service in a market environment.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.