Question

A company had following Current Assets and Current Liabilities:

Debtors = ₹ 1,20,000 

Creditors = ₹ 60,000 

Bills Payable = ₹ 40,000 

Stock = ₹ 60,000 

Loose Tools = ₹ 20,000 

Bank Overdraft = ₹ 20,000 

Calculate Current ratio.

Answer 1

1. Current Assets = Debtors + Stock + Loose Tools

= 1,20,000 + 60,000 + 20,000

= ₹ 2,00,000

2. Current liabilities = Creditors + Bills payable + Bank overdraft

= 60,000 + 40,000 + 20,000

= ₹ 1,20,000

3. Current ratio = \(\frac{Current\,assets}{Current\,liabilities}\)

= \(\frac{2,00,000}{1,20,000}\)

= \(\frac{5}{3}\)

= 5 : 3