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Financial Management
Following information has been provided from the books of M/s Laxmi & Co. for the year ending on 31st March, 2020: Net Working Capital ` 4,80,000 Bank overdraft ` 80,000 Fixed Assets to Proprietary ratio 0.75 Reserves and Surplus ` 3,20,000 Current ratio 2.5 Liquid ratio (Quick Ratio) 1.5 You are required to PREPARE a summarised Balance Sheet as at 31st March, 2020 In the answer (see page 6 of the PDF attached below) they have arrived at Current Liability as 3.2L by using the net working capital figure and current ratio. However, a Bank Overdraft of 80,000 is there, and ICAI material (Page 3.8) has mentioned that in Net Working Capital, Current Liabilities excludes short term bank borrowings, which a bank overdraft is, right? So shouldn't we equate Current Assets - Current Liabilities with Net Working Capital + Bank Borrowings, to adjust for the exclusion?
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