Current Ratio Example : Dairy Farm Balance Sheet Example

 Let's start 

                 In today's we are going to solve an example for dairy farm balance sheet so if you are an accounting student then you can also try this example.

First, let me tell you we are going to use Assets and Liabilities in this example so let's start the example:

Dairy farm balance sheet example

Assets

Assets	Amount
Current assets
Cash and cash equivalents	$10,000
Accounts receivable	$20,000
Inventory	$15,000
Prepaid expenses	$5,000
Total current assets	$50,000
Non-current assets
Land	$100,000
Buildings and improvements	$50,000
Machinery and equipment	$25,000
Breeding livestock	$10,000
Other assets	$5,000
Total non-current assets	$190,000
Total assets	$240,000

Liabilities For Dairy Farm

Liabilities	Amount
Current liabilities
Accounts payable	$10,000
Accrued expenses	$5,000
Short-term debt	$5,000
Total current liabilities	$20,000
Long-term liabilities
Mortgages	$50,000
Other liabilities	$5,000
Total long-term liabilities	$55,000
Total liabilities	$75,000

Net worth

Net worth	Amount
Owner's equity	$165,000
Total liabilities and net worth	$240,000

Question: What is the current ratio for the dairy farm?

To find the ratio you have to follow these steps:

• Find the current assets. In this example, the current assets are $50,000.

•  Find the current liabilities. In this example, the current liabilities are $20,000.

• Divide the current assets by the current liabilities.

Current ratio = current assets / current liabilities 

current ratio = 50,000 / 20,000 

current ratio = 2.5:1

This ratio is considered to be a good indication of financial health for this dairy farm.

Conclusion

Here in this post, we add a dairy farm balance sheet example with a solution so if you are an accounting student then you should check this post and learn the method to solve these kinds of questions.