Question

Total Assets: rupee 3,00,000
Non-current Assets: rupee 2,60,000
Non-current Liabilities: rupee 80,000
Shareholders' Funds: rupee 2,00,000
Current ratio calculated on the basis of the above information will be:

• A. 0.5 : 1
• B. 2 : 1
• C. 1.5 : 1
• D. 1 : 1

Hint:

The current ratio is calculated as: \[ {Current Ratio} = \frac{{Current Assets}}{{Current Liabilities}} \] Subtract non-current assets from total assets to determine current assets, and compute current liabilities accordingly.

Answer 1

The Correct Option is B

1. Calculate Current Assets \[ {Current Assets} = {Total Assets} - {Non-current Assets} \] \[ = rupee 3,00,000 - rupee 2,60,000 = rupee 40,000 \] 2. Calculate Current Liabilities \[ {Current Liabilities} = {Total Liabilities} - {Non-current Liabilities} \] \[ = ({Total Assets} - {Shareholders' Funds}) - {Non-current Liabilities} \] \[ = (rupee 3,00,000 - rupee 2,00,000) - rupee 80,000 = rupee 20,000 \] 3. Current Ratio Calculation \[ {Current Ratio} = \frac{{Current Assets}}{{Current Liabilities}} \] \[ = \frac{rupee 40,000}{rupee 20,000} = 2 : 1 \] Thus, the correct Current Ratio is \( 2 : 1 \) (Option B).