| # | # |
| 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
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