Assume current assets totaled $57,000 and the current ratio was 1.2 before the following independent transactions:
(1) Purchased merchandise for $6,000 on short-term credit.
(2) Purchased a delivery truck for $29,000. paid $3,000 cash and signed a two-year interest-bearing note for the balance.
Required:
Compute the current ratio after each transaction.
Transaction current ratio
1) ?
2) ?

The ability of a business to pay short-term or obligations that are due within a year is gauged by the current ratio, a liquidity ratio. It explains to analysts and investors how a business can use its balance sheet's current assets to their fullest potential in order to pay off all of its current liabilities and other payables.

Generally, an acceptable current ratio is one that is in line with the industry standard or just a little bit higher. A current ratio below the sector average might be a sign of increased default or distress risk. Similarly, if a company's current ratio is significantly higher than that of its peer group, it may not be using its resources as effectively as it should.

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