Question

Working Capital ₹ 6,00,000, Total Debt ₹ 27,00,000, Non-current Liabilities ₹ 24,00,000. Calculate Current Ratio.

Answer 1

Given:

Working Capital = ₹ 6,00,000

Total Debt = ₹ 27,00,000

Non-current Liabilities = ₹ 24,00,000

$$\begin{aligned} \text{Current Liabilities} &= \text{Total Debt} - \text{Non-current Liabilities} \\ &= 27,00,000 - 24,00,000 \\ &= {₹\ 3,00,000} \end{aligned}$$ 

We know that:
$$\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$$

Therefore:
$$\begin{aligned} \text{Current Assets} &= \text{Working Capital} + \text{Current Liabilities} \\ &= 6,00,000 + 3,00,000 \\ &= {₹\ 9,00,000} \end{aligned}$$ 

Now, the Current Ratio formula is:
$$\begin{aligned} \text{Current Ratio} &= \frac{\text{Current Assets}}{\text{Current Liabilities}} \\ &= \frac{9,00,000}{3,00,000} ={3 : 1} \end{aligned}$$