Florida General Contractor Practice Exam

If a company has a current ratio of 2.5 to 1 and current assets of 200,000, what are the current liabilities?

1. 80,000

2. 100,000

3. 120,000

4. 150,000

The correct answer is: 80,000

To find the current liabilities based on the given current ratio and current assets, we start by understanding what the current ratio means. The current ratio is defined as the ratio of current assets to current liabilities. In this case, a current ratio of 2.5 to 1 indicates that for every dollar of current liabilities, the company has $2.50 in current assets. Given that the current assets are $200,000, we can set up the equation based on the current ratio: Current Ratio = Current Assets / Current Liabilities Substituting the given values into the formula, we have: 2.5 = 200,000 / Current Liabilities To solve for current liabilities, we can rearrange the equation: Current Liabilities = Current Assets / Current Ratio Now substituting the values: Current Liabilities = 200,000 / 2.5 Calculating this gives: Current Liabilities = 80,000 This provides a clear understanding of how the current ratio relates to current assets and current liabilities, confirming that the correct answer is that the current liabilities amount to $80,000.