XYZ's balance sheet as at 31 December 2004 had the following items (arranged here in random order):
|
|
EUR
|
|
EUR
|
|
Trade payables
|
5,000
|
Financial assets
|
1,500
|
|
Trade receivables
|
7,000
|
Other current assets
|
3,500
|
|
Short-term borrowings
|
8,000
|
Property, plant and equipment
|
8,500
|
|
Cash and cash equivalents
|
2,000
|
Wages payable
|
1,500
|
| Current portion of bonds payable |
2,000 |
|
|
(a) What is the current ratio at 31 December 2004?
(b) Explain what the current ratio indicates.