What is the current ratio of a company with $25,000 in current assets and $15,000 in current liabilities?

To determine the current ratio, you calculate it by dividing the total current assets by the total current liabilities. In this case, the company has current assets of $25,000 and current liabilities of $15,000.

When you perform the calculation:

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $25,000 / $15,000

Current Ratio = 1.67

This value can be simplified to approximately 1.5 when rounded, which represents how many dollars of current assets are available for each dollar of current liabilities.

A current ratio of 1.5 indicates that the company has sufficient current assets to cover its current liabilities, suggesting a solid liquidity position. This value is significant for evaluating the company's ability to meet short-term obligations, indicating that for every dollar of liability, there is $1.50 of assets available, reflecting a healthy balance in managing short-term financial obligations.