What is the liquidity ratio (current ratio) if the current assets are $15,000 and current liabilities are $3,000?

What is the liquidity ratio (current ratio) if the current assets are $15,000 and current liabilities are $3,000?

• A. 3:1
• B. 4:1
• C. 5:1
• D. 6:1

Answer: (C)

To determine the liquidity ratio, specifically the current ratio, you divide the total current assets by the total current liabilities. In this scenario, the current assets are $15,000 and the current liabilities are $3,000. The calculation would be as follows: Current Ratio = Current Assets / Current Liabilities Current Ratio = $15,000 / $3,000 = 5 This means that for every dollar of liability, there are five dollars of assets available to cover it, which provides a clear indicator of liquidity. A current ratio of 5:1 signifies a strong liquidity position, as it suggests that the company is well-positioned to meet its short-term obligations. Thus, the liquidity ratio calculated is 5:1.

To determine the liquidity ratio, specifically the current ratio, you divide the total current assets by the total current liabilities. In this scenario, the current assets are $15,000 and the current liabilities are $3,000.

The calculation would be as follows:

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $15,000 / $3,000 = 5

This means that for every dollar of liability, there are five dollars of assets available to cover it, which provides a clear indicator of liquidity. A current ratio of 5:1 signifies a strong liquidity position, as it suggests that the company is well-positioned to meet its short-term obligations.

Thus, the liquidity ratio calculated is 5:1.