Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

When Cash is ₹10,000, Stock is ₹25,000, B/R is ₹5,000, Creditors is ₹22,000 and Bank Overdraft is ₹8,000 then what will be the current ratio? 

Options:

1:2

2:1

3:4

4:3

Correct Answer:

4:3

Explanation:

The correct answer is option 4- 4:3.

Current Ratio = Current Assets / Current Liabilities
                       = 40,000 /30,000
                       = 4:3

Current asset = Cash + Stock + B/R 
                    = ₹10,000 + 25,000 + 5,000
                    = ₹40,000

Current Liabilities = Creditors + Bank Overdraft 
                          = 22,000 + 8,000
                           = ₹30,000