Calculate the Current Ratio for Each of the Following Companies

question 136

Essay

Calculate the current ratio for each of the following companies and identify the company with the strongest liquidity position.
$$\begin{array} { | l | l | l | } \hline & \text { Current Astets } & \text { Current Liabilities } \\\hline \text { Company A } & \$ 1,752,000 & \$ 1,267,000 \\\hline \text { Company I } & \$ 863,500 & \$ 481,000 \\\hline \text { Company T } & \$ 366,800 & \$ 419,000 \\\hline\end{array}$$

Analyze the relationship between cost of goods sold, cost of goods manufactured, and inventory levels.

Understand the behavior and classification of costs including variable, fixed, direct, and indirect costs.

Calculate the cost of raw materials used in production.

Understand the calculation and significance of gross margin.

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Definitions:

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial position.

Current Assets

Refers to assets that are expected to be converted into cash or used up within one year or in the operating cycle of the business, whichever is longer.

Current Liabilities

A company's debts or obligations that are due to be paid to creditors within one year.

Working Capital

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