# MGT201 GDB Solution 2021 - VU Answer

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MGT201 GDB SOLUTION FALL 2021

Due Date: 8 Dec 2021

Solution:

1.

The Benchmark of the company is 2/1

We should calculate the current ratio which is equal to = current assets / current liabilities

Where

Current Assets = Cash+ Inventory+ Accrued Receivables + Marketable

Securities

= 400,000 + 150,000 + 100,000 + 200,000

= 850,000

Current Liabilities = Account Payables + Short term debts + Accruals

= 100,000 + 150,000 + 250,000

= 500,000

Current Ratio = 850,000/500,000

Current Ratio = 1.7/1

It is lower than the benchmark

2.

If a company wants to pay off its short-term debts of Rs 20,000 we will deduct the value of Rs 200,000 from cash in Current assets and from short-term debts in current liabilities.

Current Assets = 850,000 + 200,000

= 650,000

Current Liabilities = 500,000 + 200,000

= 300,000

Now again calculate the value of Current Ratio

= 650,00/300,000

= 2.1/1

This is higher than the benchmark so the company should pay off its short-term debts.

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