Explanation Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company. The following formula is used to calculate current ratio: Current ratio = ( Current assets Current liabilities ) Compute C’s company current ratio: Step 1: Calculate the amount of total current assets. Total current assets = ( Accounts receivable + Cash + Office supplies + Prepaid insurance ) = ( $ 18 , 000 + $ 7 , 000 + $ 2 , 800 + $ 3 , 560 ) = $ 31 , 360 Step 2: Calculate the amount of total current liabilities

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Compute C’s company current ratio .

Solution Summary: The author explains C's current ratio, which assesses the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle.

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