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A company has current assets of Rs. 4,80,000 and current liabilities of Rs. 3,00,000. What is the current ratio?

easy MCQ 1 mark Class 12 · Accountancy · Analysis of Financial Statements
  1. 1.6 : 1
  2. 8 : 1
  3. 5 : 1
  4. 2 : 1
Answer
1.6 : 1

The correct answer is 1.6 : 1 — Express the result in the standard form "X : 1"; therefore, the current ratio is 1.6 : 1.

Step-by-step solution

  1. Identify the formula for current ratio: Current Ratio = Current Assets ÷ Current Liabilities.
  2. Substitute the given values: Current Ratio = 4,80,000 ÷ 3,00,000.
  3. Perform the division: 4,80,000 ÷ 3,00,000 = 1.6.
  4. Express the result in the standard form "X : 1"; therefore, the current ratio is 1.6 : 1.
Common mistake: Dividing current liabilities by current assets instead of the other way round.

Concept tested: Current ratio calculation

Published · How this solution was prepared and checked

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