Private sector Performance Measurement

14. The trading account of Calypso for the year ended 30 June 20X0 is set out below:
$ $
Sales 430,000
Opening inventories 50,000
Purchases 312,500
362,500
Closing inventories (38,000)
Cost of sales (324,500)
Gross profit 105,500
The following amounts have been extracted from the company’s statement of financial position at
30 June 20X0.
$
Trade receivables 60,000
Prepayments 4,000
Cash in hand 6,000
Bank overdraft 8,000
Trade payables 40,000
Accruals 3,000
Declared dividends 5,000
Calculate the inventories days (using average inventories) and the current ratio for Calypso Ltd for
the period.
Inventory days Current ratio
A 33 days 1.25:1
B 49 days 1.25:1
C 49 days 1.93:1
D 33 days 1.93:1

HOW DID IT CALCULATE THE CURRENT RATIO AND WHY USED THESE VALUES????