Question

Suppose these selected condensed data are taken from recent balance sheets of Bob Evans Farms (in thousands). 2022 2021 Cash $13,800 $9,200 Accounts receivable 23,200 19,900 Inventory 30,400 30,800 Other current assets 12,800 11,909 Total current assets $80,200 $71,809 Total current liabilities $257,500 $311,100 Compute the current ratio for each year.

Answer 1

Answer:

Current ratio for 2022: 0.311

Current ratio for 2021: 0.231

Explanation:

The current ratio is a liquidity ratio that indicates a company's ability to pay its current liabilities when they come due. The current ratio is calculated by the following formula:

Current Ratio =  Total Current Assets/Total Current Liabilities

In Bob Evans Farms:

Current ratio for 2022 =  $80,200/$257,500 = 0.311

Current ratio  for 2021 = $71,809/$311,100 = 0.231

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