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      Question

      From the following details, calculate Current ratio:

      Cash in Hand: Rs. 20,000 Inventories: Rs.10,00 Current liabilities: Rs. 60,000 Current assets: Rs. 80,000
      A 0.5 Correct Answer Incorrect Answer
      B 1.16 Correct Answer Incorrect Answer
      C 1.33 Correct Answer Incorrect Answer
      D 2.0 Correct Answer Incorrect Answer
      E Cannot be determined Correct Answer Incorrect Answer

      Solution

      Current Ratio = Current Assets/ Current Liabilities = 80,000/60,000 = 1.33      Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time. Inventory Turnover equals to Cot of Goods Sold (COGS)/Average Inventory. Higher inventory turns equate to higher sales, especially when compared to a competitor in the same market. Inventory turns are also an indicator of how well a company is matching its inventory levels to support its sales.

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