The current ratio reflects the relationship between the value of the current assets and the extent of the current liabilities of a business. Q.1 Calculate the current ratio for Pearson & Litt for 2019.  Q.2 Explain the results of the current‐test ratio. HINT: Include the minimum ratio recommended for the ratio in your answer.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The current ratio reflects the relationship between the value of the current assets
and the extent of the current liabilities of a business.

Q.1 Calculate the current ratio for Pearson & Litt for 2019. 

Q.2 Explain the results of the current‐test ratio.
HINT: Include the minimum ratio recommended for the ratio in your answer.

Consider the info provided below as well as the financial statements and answer the questions
that follow.
Pearson & Litt is a manufacturing company in the Eastern Cape. Their factory manufactures glass
wine bottles for the Blue Valley Beer Co.
2019
2020
Sales price per unit
R15
R19
Variable cost per unit
R6
R7
Fixed cost (FC) per annum
R650 000
R 855 500
Fixed cost per unit
R3
R4
Current assets
R450 600
R560 700
Current liabilities
R510 000
R780 000
Retained profit
R21 809
R17 600
Net Sales
R2 900 320
R 3 100 100
Cost of sales
R390 000
R475 000
Transcribed Image Text:Consider the info provided below as well as the financial statements and answer the questions that follow. Pearson & Litt is a manufacturing company in the Eastern Cape. Their factory manufactures glass wine bottles for the Blue Valley Beer Co. 2019 2020 Sales price per unit R15 R19 Variable cost per unit R6 R7 Fixed cost (FC) per annum R650 000 R 855 500 Fixed cost per unit R3 R4 Current assets R450 600 R560 700 Current liabilities R510 000 R780 000 Retained profit R21 809 R17 600 Net Sales R2 900 320 R 3 100 100 Cost of sales R390 000 R475 000
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