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Are there weaknesses in using a current ratio

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Reference no: EM132408463

Question

Keisy's Topical Kids Inc. had the following information for 2019 and 2020:

Account 12/31/2020   12/31/2019

Cash and Cash Equivalents  $12,000  $16,000

Short-Term Investments  11,000   5,000

Current Receivables, net  23,000  32,000

Inventory  26,000   16,000

Prepaid Insurance  2,000   3,000

Salaries Payable  17,000   28,000

Short-Term Notes Payable  12,000  16,000

Credit Sales for year  320,000  210,000

Answer the following questions:

Compute the Current Ratio for 2019 and 2020.

What does the results of a current ratio measure?

Did the Current Ratio improve and is Keisy's Topical Kids Inc. in good financial condition?

Are there weaknesses in using a current ratio?

Reference no: EM132408463

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