# #
Capital 8000 Plant and machinery 5000
Net profit 4000 Motor Van 4500
Drawings 200 Stock 2000
Creditors 2000 Debtors 1000
Accurals 300 Banks 100
Cash 600
14100 14100

A. 1 : 4
B. 5 : 1
C. 3 : 1
D. 2 : 1

Correct Answer:

Option A – 1 : 4

Explanation

Using the Balance Sheet, the current ratio is calculated by dividing current assets by current liabilities:

Current assets = stock + debtors + banks + cash
current liabilities = drawings + creditors + accruals

current assets = 2000 + 1000 + 100 + 600 =3700
current liabilities = 2000 + 200 + 300 = 2500
3700 ÷ 2500 = 1.4

Copyright warnings! Do not copy.