Question

Current assets of a company are Rs. 5,00,000. Current ratio is 2.5 : 1 and Liquid ratio is 1 : 1. Calculate the value of current liabilities, liquid assets and inventories.

Answer 1

Given Data:

Current Assets = Rs. 5,00,000

Current Ratio = 2.5 : 1

Liquid Ratio = 1 : 1

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

2.5 = `(5,00,000)/"Current Liabilities"`

Current Liabilities = `(5,00,000)/2.5`

Current Liabilities = 2,00,000

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

1 = `"Liquid Assets"/(2,00,000)`

Liquid Assets = 1 × 2,00,000

Liquid Assets = 2,00,000

Inventories = Current Assets − Liquid Assets

Inventories = 5,00,000 − 2,00,000

Inventories = 3,00,000