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Finding overdraft amount through current ratio

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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May 6, 2017 at 12:03 am #385008
myacca1990
Participant
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Sorry this is a bit embarrassing for me because this a question of simple maths but last time i studied maths a long time ago in high school and i was always bad in solving little difficult fractions.
Can you please show me steps how the examiner arrived at the overdraft amount?
Current ratio=Current assets/current liabilities
1.4 =3,945 + 8,219/3616+overdraft
He calculated a overdraft amount of $5073 but how?
May 6, 2017 at 10:18 am #385062
John Moffat
Keymaster
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1.4 = 12,164 / (3616 + overdraft)
Multiply both sides by (3616 + OD) :
1.4 ( 3616 + OD) = 12164
Divide both sides by 1.4:
3616 + OD = 12164/1.4 = 8689
Subtract 3616 from both sides:
OD = 8689 – 3616 = 5073
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