Question

Current liabilities of a company are Rs. 5,60,000; the current ratio is 2.5 : 1 and the quick ratio is 2 : 1. Find the value of the Inventories.

Answer 1

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

2.5 = `"Current Assets "/(5,60,000)`

Current Assets = 2.5 × 5,60,000

= 14,00,000

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

2 = `"Quick Assets "/(5,60,000)`

Quick Assets = 2 × 5,60,000

= 11,20,000

Inventories = Current Assets − Quick Assets

Inventories = 14,00,000 − 11,20,000

= 2,80,000