ABC Company has current assets of 3 million and current liabilities of 1 million. What is ABC's current ratio (rounded to the nearest hundredth)?

ABC Company has current assets of 3 million and current liabilities of 1 million. What is ABC's current ratio (rounded to the nearest hundredth)?

• A. 1.50
• B. 3.00
• C. 2.00
• D. 4.00

Answer: (B)

Current ratio measures short-term liquidity by comparing current assets to current liabilities. It’s calculated by dividing current assets by current liabilities. With 3,000,000 in current assets and 1,000,000 in current liabilities, the calculation is 3,000,000 ÷ 1,000,000 = 3.00. Rounded to the nearest hundredth, that’s 3.00. This means ABC has $3 of current assets for every $1 of current liabilities, indicating strong near-term liquidity.

Current ratio measures short-term liquidity by comparing current assets to current liabilities. It’s calculated by dividing current assets by current liabilities. With 3,000,000 in current assets and 1,000,000 in current liabilities, the calculation is 3,000,000 ÷ 1,000,000 = 3.00. Rounded to the nearest hundredth, that’s 3.00. This means ABC has $3 of current assets for every $1 of current liabilities, indicating strong near-term liquidity.