The current ratio reflects the relationship between the value of the current assetsand 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 questionsthat follow.Pearson & Litt is a manufacturing company in the Eastern Cape. Their factory manufactures glasswine bottles for the Blue Valley Beer Co.20192020Sales price per unitR15R19Variable cost per unitR6R7Fixed cost (FC) per annumR650 000R 855 500Fixed cost per unitR3R4Current assetsR450 600R560 700Current liabilitiesR510 000R780 000Retained profitR21 809R17 600Net SalesR2 900 320R 3 100 100Cost of salesR390 000R475 000

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Description: The current ratio reflects the relationship between the value of the current assetsand 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.

Definition: Current ratio is one type of liquidity ratios, it link between current assets and…

Answered: The current ratio reflects the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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

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