Question

Capital Employed ₹ 20,00,000; Fixed Assets ₹ 14,00,000; Current Liabilities ₹ 2,00,000. There are no Long-term Investments. Calculate Current Ratio.

Hint: Current Assets = Capital Employed + Current Liabilities − Fixed Assets.

Answer 1

Given:

Capital Employed: ₹ 20,00,000

Fixed Assets: ₹ 14,00,000

Current Liabilities: ₹ 2,00,000

Calculation of Current Assets:

\[\text{Current Assets} = \text{Capital Employed} + \text{Current Liabilities} - \text{Fixed Assets}\]

$$\text{Current Assets} = ₹ 20,00,000 + ₹ 2,00,000 - ₹ 14,00,000$$

$${\text{Current Assets} = ₹ 8,00,000}$$

Calculation of Current Ratio:

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

$$\text{Current Ratio} = \frac{8,00,000}{2,00,000} = 4$$

Current Ratio = 4 : 1