Question

Calculate Current Ratio, Quick Ratio and Debt to Equity Ratio from the figures given below:

Particulars		₹
Inventory		30,000
Prepaid Expenses		2,000
Other Current Assets		50,000
Current Liabilities		40,000
12% Debentures		30,000
Accumulated Profits		10,000
Equity Share Capital		1,00,000
Non-current Investments		15,000

Answer 1

(i)

Current Assets = Inventory + Prepaid Expenses + Other Current Assets

= 30,000 + 2,000 + 50,000 = 82,000

Current Liabilities = 40,000

Current Ratio = `"Current Assets"/"Current Liabilities" = 82000/40000 = 2.05 : 1`

(ii)

Liquid Assets = Current Assets − Inventory − Prepaid Expenses

= 82,000 − 30,000 − 2,000 = 50,000

Quick Ratio = `"Liquid Assets"/"Current Liabilities" = 50000/40000 = 1.25 : 1`

(iii)

Long-term Debts = 12% Debentures = 30,000

Equity = Accumulated Profits + Equity Share Capital

= 10,000 + 1,00,000 = 1,10,000

Debt-Equity Ratio = `"Long -Term Debts"/"Equity" = 30000/110000 = 0.27 : 1`