Following information has been extracted from the financial statements of ABC Company to analyze liquidity position of the Company based on current ratio.

1. If an industry bench mark of current ratio is 2:1, calculate current ratio of ABC Company from the following data and compare it with industry bench mark.

Particulars	Rs.	Particulars	Rs.
Cash	400,000	Account payables	100,000
Fixed assets	1,500,000	Accruals	150,000
Inventory	150,000	Short term debt	250,000
Net Income	725,250	10-year Bonds	150,000
Account receivables	100,000	Marketable securities	200,000
Long term Debt	850,000

2. Calculate current ratio if company has decided to use Rs. 200,000 to pay off short term debt. Discuss whether companys decision to pay off sort term debt with cash is right to improve the liquidity position? Why or why not?