To determine the current ratio, we need to calculate the current assets and current liabilities and then divide the total current assets by the total current liabilities. Below are the step-by-step calculations:
1. Determine Current Assets:
- Current assets include cash and inventory.
- Cash = \[tex]$43,000
- Inventory = \$[/tex]46,000
Calculate the total current assets:
[tex]\[
\text{Current Assets} = \text{Cash} + \text{Inventory}
\][/tex]
[tex]\[
\text{Current Assets} = 43,000 + 46,000
\][/tex]
[tex]\[
\text{Current Assets} = 89,000
\][/tex]
2. Determine Current Liabilities:
- Current liabilities include notes and wages.
- Notes = \[tex]$45,000
- Wages = \$[/tex]32,000
Calculate the total current liabilities:
[tex]\[
\text{Current Liabilities} = \text{Notes} + \text{Wages}
\][/tex]
[tex]\[
\text{Current Liabilities} = 45,000 + 32,000
\][/tex]
[tex]\[
\text{Current Liabilities} = 77,000
\][/tex]
3. Calculate the Current Ratio:
The current ratio is the total current assets divided by the total current liabilities:
[tex]\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\][/tex]
[tex]\[
\text{Current Ratio} = \frac{89,000}{77,000}
\][/tex]
[tex]\[
\text{Current Ratio} \approx 1.155844155844156
\][/tex]
So, the decimal value for the current ratio is approximately 1.1558. This indicates that for every dollar of liability, the company has about 1.156 dollars in current assets, suggesting a healthy liquidity position.
