# Chapter 4 - Accounting Ratios

#### Question 1:

From the following compute Current Ratio:

 ` ` Trade Receivable (Sundry Debtors) 1,80,000 Bills Payable 20,000 Prepaid Expenses 40,000 Sundry Creditors 1,00,000 Cash and Cash Equivalents 50,000 Debentures 4,00,000 Marketable Securities 50,000 Inventories 80,000 Land and Building 5,00,000 Expenses Payable 80,000

Current Assets = Trade Receivables + Pre-paid Expenses + Cash and Cash Equivalents + Marketable Securities + Inventories

=  ` 1,80,000 +  ` 40,000 +  ` 50,000 + 50,000 + 80,000

=  ` 4,00,000

Current Liabilities = Bills Payable + Sundry Creditors + Expenses Payable
=  ` 20,000 +
` 1,00,000 +  ` 80,000

=  ` 2,00,000

Current ratio= Current assets/Current liabilities

=4,00,000/2,00,000

=2:1

#### Question 2:

Calculate Current Ratio from the following information:

 Particulars ` Particulars ` Total Assets 10,00,000 Non-current Liabilities 2,60,000 Fixed Tangible Assets 5,00,000 Non-current Investments 3,00,000 Shareholders'  Funds 6,40,000

Total Assets = Fixed Tangible Assets + Non - Current Investments + Current Assets
10,00,000 = 5,00,000 + 3,00,000 + Current Assets
Current Assets = 10,00,000 – 8,00,000 =
` 2,00,000

Total Assets = Shareholder’s Funds + Non – Current Liabilities + Current Liabilities
10,00,000 = 6,40,000 + 2,60,000 + Current Liabilities
Current Liabilities = 10,00,000 – 9,00,000 =
` 1,00,000

Page Current ratio= Current assets/Current liabilities=1,00,000/50,000=2:1

#### Question 4:

Trade Payables  ` 50,000, Working Capital  ` 9,00,000, Current Liabilities  ` 3,00,000. Calculate Current Ratio.

Working Capital = Current Assets - Current Liabilities

9,00,000 = Current Assets − 3,00,000

Current Assets = 9,00,000 + 3,00,000 = ` 12,00,000

Current Ratio=CurrentAssets/CurrentLiabilities=12,00,000/3,00,000=4:1