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WAEC Financial Accounting 1995 Question 12

Question 12

Interpretation of Accounts

Use the following information:
Sales: ₦45,000
Opening stock: ₦20,000
Closing stock: ₦30,000
Expenses: ₦15,000
Fixed Assets: ₦40,000
Debtors: ₦10,000
Creditors: ₦5,000
Purchases: ₦25,000

Current ratio is

  1. A.16:1
  2. B.15:1
  3. C.8:1
  4. D.2:1
  5. E.0.5:1
Show the answer and explanation

Answer: C (8:1)

Explanation

Current assets (stock 30,000 + debtors 10,000) 40,000 ÷ creditors 5,000 = 8:1.