The Balance Sheet of Creamit Ltd. Shows the following figures:
                                                £
  Issued Ordinary Shares   152,000
  Cash in Hand and Bank    30,000
  Fixed Assets                   117,000
  Creditors                           24,000
  Accruals                              4,000
  5% Debentures                24,000
  Debtors                             20,000
  Provisions for Bad Debts   2,000
  Stock of Finished Goods  35,000
  Stock of Raw Material     12,000

  Work in Progress              5,000
  General Reserve               8,000
  Profit and Loss Account    5,000
 
Required:
Prepare a Balance Sheet in Vertical form.
What is the Liquid Ratio?
What is the Current Ratio?
What is the Working Capital?

 answers to testing your understanding - 8

                                               CREAMIT  LTD
                                      BALANCE SHEET AS AT ???

                                                     £           £            £

Fixed Assets                                                      117,000
Current Assets:
Stock:  Raw Materials                         12,000
  W.I. Progress                                      5,000
  Finished Goods                                 35,000
Debtors [Less Provn.]                        18,000
Cash at Bank & in Hand                     30,000
                                                           100,000
Less:  Amounts Due within one
year:
Creditors                             24,000
Accruals                                 4,000  28,000
Net Current Assets                                             72,000
                                                                            189,000
Less:  Amounts due after one
year
5% Debentures                                                   24,000
                                                                         £165,000
                                                                         =======
Ordinary Share Capital                                      152,000
General Reserve                                                   8,000
Profit and Loss Account                                       5,000
                                                                        £165,000
                                                                        ========
Liquid Ratio or Acid Test Ratio

  Current Assets - Stock      =     48,000
  Current Liabilities                     28,000
 
                                              =      1.7 : 1

Current Ratio

  Current Assets                  =      100,000
  Current Liabilities                        28,000

                                             =         3.6 : 1

Working Capital   is the same thing as net current assets and is therefore  £72,000
 
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