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CMA Intermediate · Financial Management and Business Data Analytics · Comparative, Common-Size Financial Statements and Trend Analysis

In the common-size balance sheet of Kaveri Foods Ltd, total assets are ₹20,00,000 and current assets are 40% of total assets. Current liabilities are ₹4,00,000. What is the current ratio?

The current ratio is 2.0. Current assets are 40 percent of 20,00,000, which is 8,00,000, and dividing this by current liabilities of 4,00,000 gives 2.0. Common-size percentages can be converted back into rupee values to compute ratios.

  1. A2.0Correct
  2. B0.5
  3. C2.5
  4. D1.6

Explanation

Current assets = 40% x 20,00,000 = 8,00,000. Current ratio = 8,00,000 / 4,00,000 = 2.0. The 0.5 option inverts the ratio, and 2.5 wrongly uses 50% as current assets. Working back: 2.0 x 4,00,000 = 8,00,000 = 40% of 20,00,000.

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