BALANCE SHEET AS AT 31st DECEMBER, 2010 \(\begin{array}{c|c} & ₦ & & ₦ \\ \hline \text{Capital}& 40,000 & \text{Freehold premises} & 50,000\\ \text{Less: Net loss} & \frac{5,000}{35,000} & \text{Stock} & 3,000\\ \text{Less: Drawings} & \frac{2,000}{33,000} & \text{Debtors} & 4,000\\ \text{Long term loan} & \frac{20,000}{53,000} & \text{Cash at bank} & 6,500\\ \text{Creditors} & 8,000\\ \text{Accrued expenses} & \frac{4,000}{65,000} & \text{Cash in hand} & 1,500\\ & & & \text{Total 65,000}\end{array}\)
Working capital ratio is
5 : 4
5 : 3
4 : 5
1 : 2
Correct answer is D
The working capital ratio is calculated simply by dividing total current assets by total current liabilities.
Current assets = 3000 + 4000 +6500 + 1500 = 15000
Current liabilities = 8000 + 4000 = 12000
15000/12000 = 1.25
