Question

Cash Balance ₹ 5,000; Trade Payables ₹ 40,000; Inventory ₹ 50,000; Trade Receivables ₹ 65,000 and Prepaid Expenses are ₹ 10,000. Liquid Ratio will be ______.

Options

• 1.75 : 1

• 2 : 1

• 3.25 : 1

• 3 : 1

Answer 1

Cash Balance ₹ 5,000; Trade Payables ₹ 40,000; Inventory ₹ 50,000; Trade Receivables ₹ 65,000 and Prepaid Expenses are ₹ 10,000. Liquid Ratio will be 1.75 : 1.

Explanation:

Liquid Assets = Cash Balance + Trade Receivables

= 5,000 + 65,000

= ₹ 70,000

Current Liabilities = Trade Payables = ₹ 40,000

Liquid Ratio = `"Liquid Assets"/"Current Liabilities"`

= `(70,000)/(40,000)`

= 1.75 : 1