A company seeking credit line at a bank was turned down. Among other things, the bank
stated that the company’s 2 is to 1 current ratio was not adequate. Give reasons why the
current ratio is not adequate.
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1. Income Method GNPFC = Compensation of employees + Rent + Interest + Undistributed Profits + Dividend + Net
Factor Income from Abroad + Consumption of fixed capital = 1850 + (400 +500 +900 + 200) + (-) 50+ 100 = 3900
CRORE Note: o GNPFC = NNPFC + Consumption of fixed capital o NNPFC = Compensation of employees + Rent +
Interest + Undistributed Profits + Dividend + Net Factor Income from Abroad o Compensation of employees is
income from work which includes wages and salaries in kind and cash, and contribution to social securities
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