Let the amount of current liabilities to be paid = x. Current Ratio = Current Assets / Current Liabilities. If the current ratio is 2, what are the current liabilities if current a... Let the amount of current liabilities to be paid = x. Current Ratio = Current Assets / Current Liabilities. If the current ratio is 2, what are the current liabilities if current assets are stated as 16,00,000?
Understand the Problem
The question appears to be asking for the calculation of current liabilities based on the current ratio provided and the formula presented. It involves determining the relationship between current assets and current liabilities, as well as the implications of a specific current ratio.
Answer
$5,000,000$
Answer for screen readers
The current liabilities amount to $5,000,000$.
Steps to Solve
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Identify the formula for the current ratio
The current ratio is defined as the relationship between current assets and current liabilities. The formula is given by:
$$ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} $$ -
Substitute the known values
From the question, we know:
- Current Ratio = 2
- Current Assets = 10,000,000
Now, we can set up the equation:
$$ 2 = \frac{10,000,000}{\text{Current Liabilities}} $$
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Rearranging to find Current Liabilities
To find the current liabilities, rearrange the equation:
$$ \text{Current Liabilities} = \frac{10,000,000}{2} $$ -
Calculate the value
Now, calculate the current liabilities:
$$ \text{Current Liabilities} = \frac{10,000,000}{2} = 5,000,000 $$ -
Final verification
To verify, check if substituting back gives the correct current ratio.
$$ \text{Current Ratio} = \frac{10,000,000}{5,000,000} = 2 $$
The current liabilities amount to $5,000,000$.
More Information
The current ratio is a key financial metric that assesses a company's ability to cover its short-term obligations with its short-term assets. A ratio above 1 indicates that the company has more current assets than current liabilities.
Tips
- Incorrect substitution: Ensure that the correct values are substituted into the formula.
- Miscalculating the equation: Double-check arithmetic calculations, particularly during division.
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