Finance Question *****?

Question

The current ratio of a firm w/current assets of 300,000, current liabilities of 100,000 and inventory of 100,000 is

1:1

2:1

3:1

4:1

I figured 2:1 or 3:1...please help!!

All other things being equal, an increase in the amount of fixed operating costs for a firm would be:

increase the break-even point

have no impact on the break-even point

decrease break-even point or

not enough information given

I think it would have no impact !

HELP AGAIN

Answer 1

Current ratio would be 3:1 The inventory is already part of the the current assets so disregard that info.  

Increase in fixed costs would mean increase in break even point.  Break even point is where fixed costs is equal to contribution margin.  Contribution margin is the difference between the sales and the variable costs.  If you increase the fixed costs, the break even point will increase too

Assuming everything equal, increase in fixed costs would result in:

- decrease in gross profit

- increase in cost of good sold and cost per unit of product

Answer 2

Current Ratio = Current Assets/Current Liabilities

Therefore, it would be 300,000/100,000. Which is 3. Therefore, your ratio would be 3:1

I didn't understand anything you said afterwards.. sorry.