Question

A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are ₹ 5,40,000 and Inventory is ₹ 1,50,000. Its Current Ratio will be ______.

Options

• 2 : 1

• 2.3 : 1

• 1.8 : 1

• 1.3 : 1

Answer 1

A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are ₹ 5,40,000 and Inventory is ₹ 1,50,000. Its Current Ratio will be 2.3 : 1.

Explanation:

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

1.8 = `(5,40,000)/"Current Liabilities"`

Current Liabilities = `(5,40,000)/(1.8)`

= ₹ 3,00,000

Current Assets = Liquid Assets + Inventory

= 5,40,000 + 1,50,000

= ₹ 6,90,000

Current Ratio = `(6,90,000)/(3,00,000)`

= 2.3 : 1