However, equity in the company cannot be used as collateral because its value fluctuates. The banker would have to consider that if the company is insolvent enough to require the bank's acquisition of collateral, retained earnings would not likely have any value remaining.
3) the current ratio is calculated as the current assets/current liabilities. The current assets are as follows:
Cash 15,000
Accounts Receivable 5,000
Total Current Assets 20,000
The current liabilities are as follows:
Accounts Payable 2,500
Customer Deposits 3,000
So therefore, the current ratio is as follows:
5500 = 4.18
This is a great current ratio....
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