Question

A company had Current Assets of ₹4,50,000 and Current Liabilities of ₹2,00,000. Afterwards it purchased goods for ₹30,000 on credit. Calculate Current Ratio after the purchase.

Answer 1

Current Assets = Rs 4,50,000
Current Liabilities = Rs 2,00,000
Purchase of Goods on Credit for Rs 30,000 will have two effects:

1. Increase Stock by Rs 30,000, Current Assets will thereby increase to Rs 4,80,000 (Rs 4,50,000 + Rs 30,000)

2. Increase Creditors by Rs 30,000 and therefore Current Liabilities will now be Rs 2,30,000 (Rs 2,00,000 + Rs 30,000) 

`"Current Ratio" = "Current Assets"/ "Current liability" = 480000/230000 = 2.08 : 1`