Question

Current Liabilities of a company are ₹ 15,00,000. Its Current Ratio is 3 : 1 and Liquid Ratio is 1 : 1. Calculate value of Inventory.

Answer 1

Given:

Current Liabilities: ₹ 15,00,000

Current Ratio: 3 : 1

Liquid Ratio: 1 : 1

Calculation of Current Assets:

\[\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}\] 
$$3 = \frac{\text{Current Assets}}{15,00,000}$$
$$\text{Current Assets} = 3 \times 15,00,000$$
$${\text{Current Assets} = ₹ 45,00,000}$$

Calculation of Liquid Assets:

$$\text{Liquid Ratio} = \frac{\text{Liquid Assets}}{\text{Current Liabilities}}$$

$$1 = \frac{\text{Liquid Assets}}{15,00,000}$$

$$\text{Liquid Assets} = 1 \times 15,00,000$$

$${\text{Liquid Assets} = ₹ 15,00,000}$$

Calculation of Inventory:

$$\text{Inventory} = \text{Current Assets} - \text{Liquid Assets}$$

$$\text{Inventory} = ₹ 45,00,000 - ₹ 15,00,000$$ 
$${\text{Inventory} = ₹ 30,00,000}$$