Question

Current Assets ₹ 6,00,000; Inventories ₹ 1,20,000; Working Capital ₹ 5,04,000. Calculate the Quick Ratio.

Hints:

1. Quick Assets = Current Assets − Inventories.
2. Current Liabilities = Current Assets − Working Capital.

Answer 1

Given:

Current Assets = ₹ 6,00,000

Inventories = ₹ 1,20,000

Working Capital = ₹ 5,04,000

Calculation of Quick Assets:
$$\begin{aligned} \text{Quick Assets} &= \text{Current Assets} - \text{Inventories} \\ &= 6,00,000 - 1,20,000 \\ &= {₹\ 4,80,000} \end{aligned}$$ 

Calculation of Current Liabilities:
$$\begin{aligned} \text{Current Liabilities} &= \text{Current Assets} - \text{Working Capital} \\ &= 6,00,000 - 5,04,000 \\ &= {₹\ 96,000} \end{aligned}$$ 

Calculation of Quick Ratio:
$$\begin{aligned} \text{Quick Ratio} &= \frac{\text{Quick Assets}}{\text{Current Liabilities}} \\ &= \frac{4,80,000}{96,000} = {5 : 1} \end{aligned}$$