In a common-size balance-sheet statement, a firm's current assets are reported at 37% and the long- term liabilities are at 12%. The equity is shown to be 64%.
The firm's current ratio equals ________.
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A. B. C. D.B
In a common-size balance-sheet statement, all quantities are expressed as a fraction of the total assets. Therefore, since equity equals 64%, total liabilities equal
36%, of which 12% equals long-term liabilities. Thus, current liabilities equal 24%, giving the current ratio equal to 37%/24% = 1.54.