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

If an industry benchmark 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

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?