Question

A firm has Current Ratio of 4.5 : 1 and Quick Ratio of 3 : 1. If its inventory is ₹ 60,000, find out its total current assets and total current liabilities.

Answer 1

Current Ratio is 4.5 and quick ratio is 3. Difference between current ratio and quick ratio is inventory. Therefore, inventory is 4.5 − 3 = 1.5.

If Inventory is 1.5, Current Assets = 4.5

If Inventory is 1, Current Assets = `4.5/1.5`

If Inventory is ₹ 60,000, Current Assets = `4.5/1.5 xx ₹ 60,000`

= ₹ 1,80,000

As Current Ratio is 4.5 : 1 and Current Assets are ₹ 1,80,000

Current Liabilities = `(₹ 1,80,000)/4.5`

= ₹ 40,000