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Question
Calculate Current Ratio and Liquid Ratio from the following:
| Particulars | ₹ |
| Cash and Cash Equivalents | 40,000 |
| Trade Receivables | 2,70,000 |
| Inventories (Includes Loose Tools ₹ 30,000) | 1,80,000 |
| Prepaid Expenses | 20,000 |
| Working Capital | 2,80,000 |
Numerical
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Solution
Current Assets = Liquid Assets + Inventories (excluding loose tools) + Prepaid Expenses
= ₹ 40,000 + ₹ 2,70,000 + (₹ 1,80,000 – ₹ 30,000) + ₹ 20,000
= ₹ 4,80,000
Current Liabilities = Current Assets − Working Capital
= ₹ 4,80,000 − ₹ 2,80,000
= ₹ 2,00,000
Current Ratio = `"Current Assets"/"Current Liabilities"`
= `(₹ 4,80,000)/(₹ 2,00,000)`
= 2.4 : 1
Liquid Assets = Current Assets – Inventory – Prepaid Expenses
= ₹ 4,80,000 − ₹ 1,50,000 − ₹ 20,000
= ₹ 3,10,000
Liquid Ratio = `"Liquid Assets"/"Current Liabilities"`
= `(₹ 3,10,000)/(₹ 2,00,000)`
= 1.55 : 1
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