Current Ratio = Current LiabilitiesCurrent Assets
Calculation of Current Assets:
| Particulars | Amount (Rs.) |
|---|---|
| Inventories | 50,000 |
| Trade Receivables | 50,000 |
| Advance Tax | 4,000 |
| Cash and Cash Equivalents | 30,000 |
| Total Current Assets | 1,34,000 |
Calculation of Current Liabilities:
| Particulars | Amount (Rs.) |
|---|---|
| Trade Payables | 1,00,000 |
| Bank Overdraft | 4,000 |
| Total Current Liabilities | 1,04,000 |
Current Ratio Calculation:
Current Ratio = 1,04,0001,34,000 = 1.29 (approximately)
Therefore, Current Ratio = 1.29:1
Note: Bank overdraft is a current liability because it is repayable on demand. Advance tax is a current asset as it represents a prepaid expense/advance payment to the government.