Current Ratio

2007-05-12 9:02 pm
Current ratio = Current Assets/ Current Liabilities.
If CR is > 1, then if CA and CL both fall, the overall ratio will increase.

Explain and justify.

回答 (1)

2007-05-12 9:19 pm
✔ 最佳答案
CR>1 means current assets is greater than current liabilities.
If both fall at the same amount, the percentage decrease in CA is less than CL.
For example, if CA=100 and CL=50, both decrease by 10.
% decrease in CA=90-100/100=-10%
% decrease in CL=40-50/50=-20%
(Current ratio before=100/50=2
Current ratio after=90/40=2.25)

Therefore, current ratio rise.

2007-05-12 19:06:14 補充:
sorry, change the world decrease to change.


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