\(\begin{array}{c|c}
N & N \\
\hline
...
NNCapital 8000Plant and machinery5000Net profit 4000Motor Van 4500Drawings 200Stock 2000Creditors 2000Debtors 1000Accurals 300Banks 100Cash 6001410014100
What is the current ratio?
1 : 4
5 : 1
3 : 1
2 : 1
Correct answer is A
Using the Balance Sheet, the current ratio is calculated by dividing current assets by current liabilities:
Current assets = stock + debtors + banks + cash
current liabilities = drawings + creditors + accruals
current assets = 2000 + 1000 + 100 + 600 =3700
current liabilities = 2000 + 200 + 300 = 2500
3700 ÷ 2500 = 1.4
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