Business – 10.2 Analysis of published accounts – Liquidity ratios | e-Consult
10.2 Analysis of published accounts – Liquidity ratios (1 questions)
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Current ratio is calculated as Current Assets ÷ Current Liabilities.
| Before sale | Current Assets = 500 | Current Liabilities = 250 | Current Ratio = 500 ÷ 250 = 2.0 |
| After sale | Current Assets = 500 + 80 = 580 | Current Liabilities = 250 (unchanged) | Current Ratio = 580 ÷ 250 = 2.32 |
The sale of non‑core assets raises cash, increasing current assets and improving the current ratio from 2.0 to 2.32. This indicates enhanced short‑term liquidity, though the company must consider the loss of the asset’s future income potential.