Question

Calculate Current Ratio from the following information:

Particulars	₹	Particulars	₹
Total Assets	20,00,000	Non-current Liabilities	5,20,000
Fixed Tangible Assets	10,00,000	Non-current Investments	6,00,000
Shareholders’ Funds	12,80,000

Answer 1

Given:

Total Assets = ₹ 20,00,000

Fixed Tangible Assets = ₹ 10,00,000

Non-current Investments = ₹ 6,00,000

Shareholders’ Funds = ₹ 12,80,000

Non-current Liabilities = ₹ 5,20,000

$$\begin{aligned} \text{Current Assets} &= \text{Total Assets} - (\text{Fixed Tangible Assets} + \text{Non-current Investments}) \\ &= 20,0,000 - (10,00,000 + 6,00,000) \\ &= 20,00,000 - 16,00,000 \\ &= {₹\ 4,00,000} \end{aligned}$$

We also know that:

$$\text{Total Assets} = \text{Shareholders' Funds} + \text{Non-current Liabilities} + \text{Current Liabilities}$$

Therefore:

$$\begin{aligned} \text{Current Liabilities} &= \text{Total Assets} - (\text{Shareholders' Funds} + \text{Non-current Liabilities}) \\ &= 20,00,000 - (12,80,000 + 5,20,000) \\ &= 20,00,000 - 18,00,000 \\ &={₹\ 2,00,000} \end{aligned}$$

Now, the Current Ratio formula is:
$$\begin{aligned} \text{Current Ratio} &= \frac{\text{Current Assets}}{\text{Current Liabilities}} \\ &= \frac{4,00,000}{2,00,000} ={2 : 1} \end{aligned}$$