Question

 A business has a current ratio of 3 : 1 and quick ratio of 1.2 : 1. If the working capital is Rs 1,80,000, calculate the total Current Assets and value of stock.

Answer 1

`"Current Ratio"= "Current Assest"/"Current Liabilities"=3:1`  

Or,`3/1="Current Assest"/"Current Liabilities"` 

Or, Current Assets = 3 × Current Liabilities

Working Capital = Current Assets − Current Liabilities

Or, 1,80,000 = Current Assets − Current Liabilities

Or, 1,80,000 = 3 Current Liabilities − Current Liabilities

Or, 1,80,000 = 2 Current Liabilities

Or, Current Liabilities = Rs 90,000

∴Current Assets = 3 × 90,000 = Rs 2,70,000 

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

Quick Ratio = 1.2 : 1

Quick Assets = Current Assets − Stock

Or, Quick Assets = 90,000 − Stock

Current Liabilities = Rs 90,000 

`1.2/1=(2,70,000-"stock")/(90,000)` 

Or, 1,08,000 = 2,70,000 − Stock

Stock = Rs 1,62,000