\(\begin{array}{c|c}
N & N \\
\hline
\text{Capital 8000} & \text{Plant and machinery5000}\\
\hline
\text{Net profit 4000} & \text{Motor Van 4500} \\
\hline
\text{Drawings 200} & \text{Stock 2000} \\
\hline
\text{Creditors 2000} & \text{Debtors 1000} \\
\hline
\text{Accurals 300} & \text{Banks 100} \\
\hline
& \text{Cash 600} \\
\hline
14100 & 14100 \\
\end{array}\)
What is the current ratio?
Using the Balance Sheet, the current ratio is calculated by dividing current assets by current liabilities:
Current assets = stock + debtors + banks + cash
current liabilities = drawings + creditors + accruals
current assets = 2000 + 1000 + 100 + 600 =3700
current liabilities = 2000 + 200 + 300 = 2500
3700 ÷ 2500 = 1.4
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