Current ratio : A part of liquidity ratios , current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. The formula to calculate current ratio is, Current Ratio = Current Assets Current Liabilities Current liability: Every company has some debts or liabilities which need to be paid in less than one year or during current accounting period. Those debts or liabilities are called current liabilities. Current Assets: Every company has some assets which need to be convertible in less than one year or during current accounting period. Those assets are called current assets. To identify: The three factors that will decide if the company‘s current ratio is good or bad.

Question

Want to see the full answer?

Answer 1

Question

Chapter 13, Problem 4DQ

To determine

Current ratio:

A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period.
The formula to calculate current ratio is,

Current Ratio=Current Assets Current Liabilities

Current liability: Every company has some debts or liabilities which need to be paid in less than one year or during current accounting period. Those debts or liabilities are called current liabilities.

Current Assets: Every company has some assets which need to be convertible in less than one year or during current accounting period. Those assets are called current assets.

To identify: The three factors that will decide if the company‘s current ratio is good or bad.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Which of the following statements is incorrect regarding manufacturing overhead? Multiple Choice Manufacturing overhead includes both fixed and variable costs. Manufacturing overhead is an indirect cost to units or products. Actual overhead costs are used in the cost accounting process. Actual overhead costs tend to remain relatively constant over various output levels.

Palladium, Incorporated recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records. Cost of Goods Sold $ 72,500 Work-in-Process Inventory, Beginning 13,500 Work-in-Process Inventory, Ending 10,500 Selling and Administrative Expense 18,750 Finished Goods Inventory, Ending 19,125 Finished Goods Inventory, Beginning ?question mark Direct Materials Used ?question mark Factory Overhead Applied 13,500 Operating Income 14,825 Direct Materials Inventory, Beginning 11,675 Direct Materials Inventory, Ending 6,525 Cost of Goods Manufactured 67,050 Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The Chief Financial Officer of Palladium, Incorporated has asked you to recalculate the following accounts and to report to him by the end of the day. What is the amount of direct materials purchased?

On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,650. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $93,500. During the next two years, the following information is available for Zip Company: Year Income Dividends Declared Common Stock Fair Value (12/31) 2022 $ 313,000 2023 $ 70,000 $ 7,800 374,000 2024 90,000 15,100 476,000 At December 31, 2023, Zip reports a net book value of $294,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023. Required: Assume Akron applies the equity method to its Investment in Zip account: What amount of equity income should Akron report for 2024? On Akron's December 31, 2024, balance sheet, what amount is reported for the…