Question

A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are ₹ 2,00,000 and Inventory is ₹1,80,000. Current Ratio will be ______.

Options

• 0.9 : 1

• 1.9 : 1

• 1.4 : 1

• 2.4 : 1

Answer 1

A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are ₹ 2,00,000 and Inventory is ₹ 1,80,000. Current Ratio will be 2.4 : 1.

Explanation:

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

1.5 = `("Quick Assets")/(2,00,000)`

Quick Assets = 2,00,000 × 1.5

= ₹ 3,00,000

Current Assets = Quick Assets + Inventory

= 3,00,000 + 1,80,000

= ₹ 4,80,000

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

= `(4,80,000)/(2,00,000)`

= 2.4 : 1