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Question
Current Ratio 3 : 1; Working Capital ₹ 4,00,000; Inventory ₹ 2,50,000. Calculate Current Assets, Current Liabilities, Quick Ratio.
Numerical
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Solution
Current Ratio is 3 : 1, therefore, based on 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 ₹ 4,00,000, Current Assets = `3/2 xx ₹ 4,00,000`
= ₹ 6,00,000
Working Capital = Current Assets − Current Liabilities
₹ 4,00,000 = ₹ 6,00,000 − Current Liabilities
Current Liabilities = ₹ 6,00,000 − ₹ 4,00,000
= ₹ 2,00,000
Liquid Assets = Current Assets − Inventories
= ₹ 6,00,000 − ₹ 2,50,000
= ₹ 3,50,000
Quick Ratio = `"Liquid Assets"/"Current Liabilities"`
= `(₹ 3,50,000)/(₹ 2,00,000)`
= 1.75 : 1
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