Question

X Ltd has a Current Ratio of 3 : 1 and Quick Ratio of 2 : 1. If the excess of Current Assets over

Quick Assets as represented by Stock is Rs 40,000, calculate Current Assets and Current Liabilities.

Answer 1

Current Ratio = 3 : 1

Quick Ratio = 2 : 1

Stock = Rs 40,000 

`"Current Ratio"="Current Assets"/"Current Liabilities"` 

`∴3="Current Assets"/"Current Liabilities"` 

Or, Current Assets = 3 current liabilities …(1) 

`"Quick Ratio"="Quick Assets(Current Assest- Stock)"/"Current Liability "` 

2=`("Current Assets"-(40,000))/"Current Liabilities"` 

Or, 2 Current Liabilities = Current Assets − 40,000

From equation (1)

2 Current Liabilities = 3 Current Liabilities − 40,000

Or, Current Liabilities = Rs 40,000

Current Assets = 3 current liabilities

∴ Current Assets = 3 × 40,000 = Rs 1,20,000