The statement of financial position of Rosie Ltd.includes the following entries: inventory £25,000,trade receivables £12,000,cash £11,000 and current liabilities £25,000 (made up of trade payables £16,000,short-term borrowing £800 and £8,200 current tax payable).Calculate the current ratio.
A) 0.9: 1
B) 1:1
C) 0.4:1
D) 1.9:1

Question

Quizplus · Accepted Answer

The current ratio is calculated as Current Assets / Current Liabilities. Current Assets include inventory (£25,000), trade receivables (£12,000), and cash (£11,000), totaling £48,000. Current Liabilities total £25,000. Therefore, the current ratio is £48,000 / £25,000 = 1.92, which rounds to 1.9:1.

The Statement of Financial Position of Rosie Ltd