At 31 December 2021, Martha Limited has inventory of £48,000, trade payables of £68,000, cash at the bank of £22,000, trade receivables of £81,000, cash in hand of £1,000 and current tax payable of £15,000. Martha Limited also has a loan of £60,000 which is due for repayment by 5 annual instalments commencing on 30 June 2022. What is Martha Limited's current ratio?

Question

Quizplus · Accepted Answer

The current ratio is calculated as Current Assets / Current Liabilities. Current Assets include inventory (£48,000), cash at the bank (£22,000), trade receivables (£81,000), and cash in hand (£1,000), totaling £152,000. Current Liabilities include trade payables (£68,000), current tax payable (£15,000), and the first installment of the loan due within a year (£12,000, which is £60,000/5), totaling £95,000. The current ratio is £152,000 / £95,000 = 1.60:1.

At 31 December 2021, Martha Limited Has Inventory of £48,000