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2 cards from this section. Quick, good the night before a test.
Calculate the current ratio if a company has $150,000 in current assets and $75,000 in current liabilities.
Use the formula Current Assets / Current Liabilities.
What is a healthy current ratio for most companies?
Think of the common guideline for adequate liquidity.
What is the formula for calculating the Current Ratio?
Remember the structure that highlights a firm's immediate financial health.
True or False: A Quick Ratio of 0.5 indicates that a company can cover its short-term liabilities.
Think of what a ratio below 1 signifies in the context of liquidity.
A tech company has a current ratio of 1.2 and wants to improve its liquidity. They decide to reduce some liabilities by $50,000 and increase current assets by $100,000. What will the new current ratio be?
Use the formula to calculate the new ratio based on the changes made.
Discuss the potential impact on the stock price of a tech startup if it reports a current ratio of below 1 in its quarterly earnings report.
Consider how markets react to perceived financial health.
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