Get Started
Start Free Mocks
CUETMOCK

Ace Your

CUET Preparation Today

Start Free Mocks
Home Questions H8HBGMPFD4
Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Read the following passage and answer the question.

ABC Ltd has a business of shoes in New Delhi. From the last year, profits of the company has reduced so the company wants to know the earning capacity and liquidity position of its company so that it can take correct measures. Following information is available to the company.

1) Cash revenue from operations was 1/3rd of total revenue from operations
2) Cash revenue from operations was ₹1,40,000
3) Cash purchase was 25% of credit purchase
4) Cash purchase was ₹50,000
5) Opening inventory ₹30,000
6) Closing inventory was ₹10,000 more than opening inventory
7) Carriage inwards is ₹12,000 & Non current liabilities is ₹80,000
8) Total assets is ₹8,00,000 & fixed assets is ₹5,40,000
9) Non-current investments ₹1,10,000 & Shareholders funds ₹6,00,000

 

What is the current ratio of the company?

Options:

1.25:1

1:1

1.5:1

1.75:1

Correct Answer:

1.25:1

Explanation:

The correct answer is option 1- 1.25:1.

Total of assets side of balance sheet will be equal to total of equity and liabilities side.
So, Current liabilities = Total assets - Shareholder's funds - Non Current liabilities
                               = 8,00,000 - 6,00,000 - 80,000
                               = ₹1,20,000

Current assets = Total assets - Fixed assets - Non current investments
                      = 8,00,000 - 5,40,000 - 1,10,000
                      = ₹1,50,000

Current Ratio = Current assets / Current liabilities
                    = 1,50,000/1,20,000
                    = 1.25:1

CUET Questions