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In this video, we calculate the current ratio.

Question one. Calculate the current ratio: current assets two lakh forty thousand rupees, current liabilities one lakh twenty thousand rupees.

Current ratio equals current assets divided by current liabilities.

Substitute two lakh forty thousand rupees divided by one lakh twenty thousand rupees.

The currency units cancel, and dividing both amounts by one lakh twenty thousand gives two to one.

So, the current ratio is two to one. This means you have two rupees of current assets for every one rupee of current liabilities.