IPA IP 2022 Question 28
A question IPA Japan published in 令和4年度 ITパスポート試験 公開問題 問28, translated into English. ITPEC is based on the same exams.
When the assets, liabilities, and net assets of Company A in a certain period are as shown below, what is the current ratio in percentage, which is one of the indicators of management safety and shows the short-term ability to pay?
Explanation
200% — the current ratio is current assets divided by current liabilities.
- •Current assets: 3,000 million yen
- •Current liabilities: 1,500 million yen
- •Current ratio: 3,000 ÷ 1,500 × 100 = 200%
Current assets (cash, receivables, inventory) turn into cash within a year, and current liabilities must be paid within a year. A ratio of 200% means the company holds twice what it owes in the short term, so it can comfortably pay its short-term debts; above 100% is the minimum and around 200% is traditionally called healthy. Fixed assets, fixed liabilities and shareholders' equity play no part.
Answer (d)
Why not others:
- •(a) 50 — the ratio upside down, current liabilities over current assets, 1,500 ÷ 3,000
- •(b) 100 and (c) 150 — neither is current assets over current liabilities; (c) matches fixed assets over current assets, 4,500 ÷ 3,000, which measures nothing about short-term payment
Key rule: Current ratio = current assets ÷ current liabilities × 100; the higher it is, the safer the company's short-term ability to pay.
Corporate Activities · AI-written, may contain errors
This question comes from the past questions IPA Japan publishes, translated into English by ITPEC Practice. ITPEC Practice is an independent study tool and is not affiliated with IPA or ITPEC. See the original paper (PDF) or Report an issue.