The current ratio shows considerable improvement for the year ended 20X8, following the disposal of Sinker Co. The group was in a net current liability position at the end of 20X7. This would suggest that Sinker Co may have had a large bank overdraft balance or high levels of payables at 31 December 20X8. It would appear that the sale of Sinker Co has improved the liquidity of the group. It should be noted that 20X8 group current assets of $112m will include the $20m consideration for Sinker Co. This could be used to settle some of the long-term debt. Bank loans have already decreased by at least $50m. There is no information about the long-term loans of Sinker Co. Gearing has been reduced during the year from 20 percent to 13 percent but, without further information on Sinker Co’s non-current liabilities, it is very difficult to tell if this is a result of the disposal or whether Karl Co has simply repaid debt during the year.