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Home Questions H8HBGMPFD4
Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

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 ₹140000
3) Cash purchase was 25% of credit purchase
4) Cash purchase was ₹50000
5) Opening inventory ₹30000
6) Closing inventory was ₹10000 more than opening inventory
7) Carriage is ₹12000 & Non current liabilities is ₹80000
8) Total assets is ₹800000 & fixed assets is ₹540000
9) Non-current investments ₹110000 & Shareholders funds ₹600000

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
                                 = 800000 - 600000-80000
                                 = ₹120000

* Current assets = Total assets-Fixed assets-Non current investments
                           = 800000 - 540000 - 110000
                           = ₹150000

Current Ratio= Current assets / Current liabilities
                     = 150000/120000
                     = 1.25:1

 

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