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Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Read the following information given in the financial statements of the company and answer the following question.

 

PARTICULARS  AMOUNT (₹)
Income tax paid in advance 30,000
Provision for tax 55,000
Bank Overdraft 25,000
Trade investments 2,50,000
Marketable securities 40,000
Tangible fixed asset 6,00,000
Intangible asset 1,00,000
Trade receivables included provision for doubtful debts of ₹20,000 2,00,000
Trade payables 1,20,000
Cash balance 80,000
Rent payables 10,000
Dividend payables 30,000
Inventories 3,90,000
8% Debentures matured after 6 years 2,80,000

What will be the current ratio of the company?

Options:

2:1

1:1

4:2

3:1

Correct Answer:

3:1

Explanation:

The correct answer is option 4- 3:1.

Current assets = Marketable securities + trade receivables - Provision for doubtful debts + cash balance + inventories + income tax paid in advance
                        = 40,000 + 2,00,000 - 20,000 + 80,000 + 3,90,000 + 30,000
                        = ₹7,20,000

Current liabilities = Trade payables + rent payable + dividend payable + bank overdraft + provision for tax
                           = 1,20,000 + 10,000 + 30,000 + 25,000 + 55,000
                           = ₹2,40,000

CURRENT RATIO =  Current asset/ Current liabilities
                          = 7,20,000/2,40,000
                          = 3:1

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