Current Liabilities: Bank overdraft, creditors, bills payable, outstanding expenses, short term loan taken, provision for taxation, pre received income, proposed and unclaimed dividend etc.
(A) What are the components of 'Current Ratio'?
Ans. Meaning: Current ratio is a ratio showing the relationship between current assets and current liabilities.
Formula: Current ratio is calculated as per the following formula:
Current Ratio: Current Assets / Current Liabilities
Components of Current Ratio: The following are the components of Current Ratio.
Current Assets: Cash and Bank balances, debtors, bills receivable, stock of goods, prepaid expenses, short loans, advances given, incomes receivable, disposable investments etc.
Current Liabilities: Bank overdraft, creditors, bills payable, outstanding expenses, short term loan taken, provision for taxation, pre received income, proposed and unclaimed dividend etc.