Current Ratio measures the relationship between current assets and current liabilities.
Formula: Current Ratio = Current LiabilitiesCurrent Assets
Calculation of Current Assets:
Inventories + Trade receivables + Advance tax + Cash and cash equivalent
= 50,000 + 50,000 + 4,000 + 30,000 = Rs. 1,34,000
Note: Advance tax is a current asset as it represents a payment made in advance that will be adjusted against tax liability.
Calculation of Current Liabilities:
Trade payables + Short-term borrowings (bank overdraft)
= 1,00,000 + 4,000 = Rs. 1,04,000
Current Ratio:
= 1,04,0001,34,000 = 1.288 = 1.29:1 (rounded to two decimal places)