Question

Shine Limited has a current ratio 4.5:1 and quick ratio 3:1; if the inventory is 36,000, calculate current liabilities and current assets.

Answer 1

`"Current Ratio" = " Curent Assets"/"Current Liablities"`

or, `4.5/1 = "Current Aseets"/"Current Liablities"`

or, 4.5 Current Liabilities = Current Assets

`"Quick Ratio" = "Quick Assets"/"Current Liablities"`

or, `3.1 = "Quick Assets"/"Current LIablities"`

or, 3 Current Liabilities = Quick Assets

`"Quick assets" =" Current Assets" - "Inventory" = "Current Assets" - 36,000`

Current Assets − Quick Assets = 36,000

or, 4.5 Current Liabilities − 3 Current Liabilities = 36,000

or, 1.5 Current Liabilities = 36,000

or, Current Liabilities = 24,000

Current Assets = 4.5 Current Liabilities

`or, "Current Assets" = "4.5 "xx" 24,000"`

                                 = `1,08,000`

Note: The solution given in the book is incorrect as it from the given figures Current Assets is ascertained to be Rs 1,08,000 and Current Liabilities Rs 24,000.