Calculate Clayton Corporation's current ratio with the following information, rounding to two decimal places. Determine if...
Calculate Clayton Corporation's current ratio with the following information, rounding to two decimal places. Determine if the company is in a stronger position in Year 1 or Year 2.
Year 2
Current Assets 6500
Fixed Assets 11000
Current liabilities 7250
Long-Term liabilities 9500
Year 1
Current Assets 6550
Fixed Assets 15000
Current Liabilities 9000
Long-Term Liabilities 12000
Homework Answers
Current ratio for Year-1
Current ratio = Total current assets / Total current liabilities
= $6,500 / $9,000
= 0.72 Times
Current ratio for Year-2
Current ratio = Total current assets / Total current liabilities
= $6,500 / $7,250
= 0.90 Times
CONCLUSION
Here, the company is in a stronger position in Year 2, since it has the higher current ratio of 0.90 Times in Year2 as compared to the current ratio of 0.72 Times in Year 1.
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