Question

if a business has a current ratio of 1/2 which of the following is true? it has $1 in current assets for every $2 in current liabilities. it has $3 in current assets for every $2 in current liabilities. it has $2 in current assets for every $1 in current liabilities.

Explanation:

The current ratio is calculated as $\frac{\text{Current Assets}}{\text{Current Liabilities}}$. A current ratio of $\frac{1}{2}$ means for every $2 in current liabilities, there is $1 in current assets (since $\frac{1}{2}$ implies Current Assets = 1 part, Current Liabilities = 2 parts when the ratio is expressed as a fraction of assets to liabilities). The other options do not match this ratio: the second option would be a ratio of $\frac{3}{2}$, and the third would be a ratio of $\frac{2}{1}$.

Answer:

A. It has $1 in current assets for every $2 in current liabilities.