PMPrivate 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????