Question

Current Ratio 3 : 1; Quick Ratio 1.2 : 1; Working Capital ₹ 1,50,000. Calculate Current Assets, Current Liabilities and Inventory.

Answer 1

Current Ratio of the company is 3 : 1, therefore, based on the current ratio, the working capital is 3 − 1 = 2.

If Working Capital is 2, Current Assets = 3

If Working Capital is 1, Current Assets = `3/2`

If Working Capital is 1,50,000,

Current Assets = `3/2 xx ₹ 1,50,000`

= ₹ 2,25,000

Working Capital = Current Assets − Current Liabilities

₹ 1,50,000 = ₹ 2,25,000 − Current Liabilities

Current Liabilities = ₹ 2,25,000 − ₹ 1,50,000

= ₹ 75,000

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

1.2 = `"Liquid Assets"/(₹ 75,000)`

Liquid Assets = ₹ 75,000 × 1.2

= ₹ 90,000

Inventory = Current Assets − Liquid Assets

= ₹ 2,25,000 − ₹ 90,000

= ₹ 1,35,000