Question

Calculate the Quick Ratio from the following:

Working Capital ₹ 4,00,000; Total Debts ₹ 18,00,000, Non-Current Liabilities ₹ 16,00,000; Inventories ₹ 1,90,000; Prepaid Expenses ₹ 10,000.

Answer 1

Calculation of Current Liabilities:

\[\text{Current Liabilities} = \text{Total Debts} - \text{Non-Current Liabilities}\]

$$\text{Current Liabilities} = ₹ 18,00,000 - ₹ 16,00,000$$

$${\text{Current Liabilities} = ₹ 2,00,000}$$

Calculation of Current Assets:

$$\text{Current Assets} = \text{Working Capital} + \text{Current Liabilities}$$

$$\text{Current Assets} = ₹ 4,00,000 + ₹ 2,00,000$$

$${\text{Current Assets} = ₹ 6,00,000}$$

Calculation of Quick Assets:

$$\text{Quick Assets} = \text{Current Assets} - (\text{Inventories} + \text{Prepaid Expenses})$$

$$\text{Quick Assets} = ₹ 6,00,000 - (₹ 1,90,000 + ₹ 10,00,000)$$

$$\text{Quick Assets} = ₹ 6,00,000 - ₹ 2,00,000$$

$${\text{Quick Assets} = ₹ 4,00,000}$$

Calculation of Quick Ratio:

$$\text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}$$

$$\text{Quick Ratio} = \frac{4,00,000}{2,00,000} = 2$$

Quick Ratio = 2 : 1