You are evaluating the balance sheet for PattyCake's Corporation. From the balance sheet you find the following balances:

cash and marketable securities = $360,000;

accounts receivable = $1,280,000;

inventory = $2,180,000;

accrued wages and taxes = $540,000;

accounts payable = $840,000; and

notes payable = $680,000.

Calculate Current Ratio?

Current Assets are those asset which will be liquidated within next one year.

cash and marketable securities $360,000

accounts receivable $1,280,000

inventory $2,180,000

Total Current Assets $3,820,000

Current Liabilities are those which is payable within next one year.

accrued wages and taxes $540,000

accounts payable $840,000

notes payable $680,000

Total Current Liabilities $2,060,000

Current ratio measures the capability of a business to pay the current liabilities if it becomes due.

Current Ratio = Current Assets / Current Liabilities = $3,820,000 / $2,060,000 = 1.85 times