NOTE: required interpretation. (Not sure in our interpretation) Current Ratio = Current Assets/Current Liabilities2020201913,896,794,073/13,864,318,289 =1.00:112,703,448,506/13,706,759,724 =0.93:1This means that the business has P1.00 current assets to pay for a peso ofa current liability in 2020 against P0.93 current assets to pay for a peso of currentliability in 2019. The rule of thumb is 2:1. Both periods show illiquidity with 2019showing it is very illiquid.Quick Ratio or Acid Test Ratio = Quick Assets / Current Liabilities202020198,811,687,849/13,864,318,289 =0.64:18,055,634,208/13,706,759,724 =0.59:1This means that the business has 0.64 quick assets to pay for a peso of current liabilityin 2020. Both periods show illiquidity, more so in 2019. If the company is going to see this forgrowth, new market, then it is wise to build up current assets or working capital. But if not, thenthe idle funds must be moved and used for profitable ventures or else profitability and return onthe owner's investment will be adversely affected.

Current Ratio is the ratio which shows the short term liquidity position of the company that how…

Answered: Current Ratio = Current Assets/Current…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 2MCQ

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