Question 4

The current ratio for the company is 0.21.

The current ratio is calculated by dividing total liabilities by stockholders' equity. In this case, the ratio is derived from the total liabilities of $48,561 divided by stockholders' equity of $10,158, resulting in a current ratio of 0.21.

A) 0.83

This option suggests a current ratio that implies the company has more current liabilities than equity, which does not align with the provided figures. The calculation does not support this value, as the actual ratio is much lower.

B) 1.47

A current ratio of 1.47 indicates that the company would have significantly more liabilities compared to its equity, suggesting a stronger financial position than what the provided data indicates. The calculation shows that this option does not hold true based on the figures given.

C) 1.78

This option implies an even higher current ratio than B, suggesting the company has a very favorable position regarding its liabilities and equity balance. However, the calculations clearly show that the current ratio is much lower than this value, making it incorrect.

D) 0.21

This is the correct answer, as it accurately reflects the company's financial state by calculating the current ratio as total liabilities ($48,561) divided by stockholders' equity ($10,158), resulting in 0.21. This indicates that for every dollar of equity, the company has $0.21 in liabilities.

Conclusion

The correct answer is definitively 0.21, as it aligns with the calculations based on the figures provided. All other options inaccurately represent the relationship between the company's liabilities and equity, demonstrating a misunderstanding of the current ratio concept.