Test Index

JAMB Commerce 2015 Paper

Question : 49

Total: 50

What is the current ratio?

Solution:

Concept:

The current ratio measures short-term liquidity by comparing current assets with current liabilities.

Explanation:

Creditors and accrued expenses are current liabilities, so:

\text{Current liabilities} = \mathrm{N}2{,}000 + \mathrm{N}300 = \mathrm{N}2{,}300.

Total assets from the balance sheet are

\mathrm{N}14{,}100

Non-current assets are:

\mathrm{N}5{,}000 + \mathrm{N}4{,}500 = \mathrm{N}9{,}500.

Therefore, current assets are:

\mathrm{N}14{,}100 - \mathrm{N}9{,}500 = \mathrm{N}4{,}600.

Now, calculate the current ratio:

\mathrm{N}4{,}600 : \mathrm{N}2{,}300 = 2 : 1.

Answer:

2 : 1

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