You are given the following simplified statement of financial position of the Sandin Castle Company:

a Calculate the current ratio.
b Calculate the liquidity ratio.
c After preparing the statement of financial position, the company sells inventories, which had cost £4,000, for £8,000, which it immediately receives in cash. Show how the statement of financial position would appear after this transaction.

d How does the above transaction affect the current ratio and the liquidity ratio?

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Non-current assets 50,000 Current assets Inventories (at cost) 24,000 Receivables 12,000 Cash 9,000 45,000 Total assets Current liabilities 95,000 Payables 22,000 Equity Share capital 50,000 Retained earnings 23,000 73,000 95,000