Question

Current Liabilities of a company were ₹ 1,50,000 and its current ratio was 2.2 : 1. Afterwards it purchased goods on credit for ₹ 50,000. Calculate the current ratio after the purchase of goods.

Answer 1

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

2.2 = `("Current Assets")/(₹ 1,50,000)`

Current Assets = ₹ 1,50,000 × 2.2

= ₹ 3,30,000

After Purchase of Goods on credit, Inventory as well as creditors will increase:

Current Assets = ₹ 3,30,000 + ₹ 50,000 (Inventory)

= ₹ 3,80,000

Current Liabilities = ₹ 1,50,000 + ₹ 50,000 (Creditors)

= ₹ 2,00,000

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

= `(₹ 3,80,000)/(₹ 2,00,000)`

= 1.9 : 1