Read the following information about Balance Sheet of XYZ Ltd. (As of 31st March 2020) and answer the question.

EQUITY AND LIABILITIES (Amount in ₹)

1. Shareholder's Funds

• a. Share Capital 40,000
• b. Reserves and Surplus 10,000

2. Non-Current Liabilities

• a. Long term Loan (Debentures) 1,00,000

3. Current Liabilities

• a. Short term Borrowings 25,000
• b. Trade Payables 30,000

TOTAL 2,05,000

ASSETS

1. NON CURRENT ASSETS

• Fixed Assets 95,000

2. CURRENT ASSETS

• a. Inventories 25,000
• b. Trade Receivables 45,000
• c. Cash & Cash Equivalents 10,000
• d. Prepaid Expenses 30,000

TOTAL 2,05,000

From the above information, calculate Current Ratio.

2:1

The correct answer is option 3- 2:1.

CURRENT ASSETS = Inventories   + Trade Receivables  + Cash & Cash Equivalents + Prepaid Expenses
                            = 25,000 + 45,000 + 10,000 + 30,000
                            = ₹1,10,000

Current Liabilities = Short term Borrowings  + Trade Payables
                            = 25,000 + 30,000
                            = ₹55,000

Current ratio = Current assets/Current liabilities
                     = 1,10,000/55,000
                     = 2:1