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WAEC Accounting 2012 Paper

Question : 47

Total: 47

\text{N} \text{N}

\text{-} \; \text{Capital} \; 40,000 \qquad \text{Freehold premises} \; 50,000

\begin{array}{l l l l} \; \text{Less: Net loss} \; & \; \frac{5,000}{35,000} & \; \text{Stock} \; & 3,000 \end{array}

\begin{array}{c c c c} \; \text{Less: Drawings} \; & \; \frac{2,000}{33,000} & \; \text{Debtors} \; & 4,000 \end{array}

\begin{array}{c c c c} \; \text{Long term loan} \; & \; \frac{20,000}{53,000} & \; \text{Cash at bank} \; & 6,500 \end{array}

\; \text{Creditors} \; 8,000

\begin{aligned} \; \text{Accrued expenses} \; & \; \frac{4,000}{65,000} & \; \text{Cash in hand} \; & 1,500 \end{aligned}

\; \text{Total 65,000} \;

Working capital ratio is

Solution:

Concept:

The working capital ratio measures a firm's ability to meet short-term obligations by comparing current assets with current liabilities.

Explanation:

Current assets are stock, debtors, cash at bank and cash in hand.

\text{Current assets} = 3{,}000 + 4{,}000 + 6{,}500 + 1{,}500 = 15{,}000

Current liabilities are creditors and accrued expenses.

\text{Current liabilities} = 8{,}000 + 4{,}000 = 12{,}000

Working capital ratio

= \dfrac{15{,}000}{12{,}000} = \dfrac{5}{4}

Hence, the ratio is

5:4

Answer:

5:4

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