Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

Calculate the current ratio if working capital is ₹45000, total debt=₹100000, and long-term debt = ₹70000.

Options:

2:1

2.5:1

3:2

1:2

Correct Answer:

2.5:1

Explanation:

Current ratio = current asset/current liabilities
                   = 75000/30000
                   = 2.5:1

Current liabilities = total debt - long-term debt
                          = 100000 - 70000
                          = ₹30000

Current assets = working capital + current liabilities
                      = 45000 + 30000
                       = ₹75000