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Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017. - Accountancy

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ConceptTypes of Ratios

Question

Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017. 

Particulars  

Amount

Rs. 

I. Equity and Liabilities    

1. Shareholders’ funds  

 

a) Share capital

24,00,000

b) Reserves and surplus

6,00,000

2. Non-current liabilities  

 

a) Long-term borrowings

9,00,000

3. Current liabilities

 

a) Short-term borrowings  

6,00,000

b) Trade payables

23,40,000

c) Short-term provisions  

60,000
Total 69,00,000
II. Assets  

1. Non-current Assets  

 

a) Fixed assets

 

Tangible assets

45,00,000

2. Current Assets

 

a) Inventories

12,00,000

b) Trade receivables

9,00,000

c) Cash and cash equivalents

2,28,000

d) Short-term loans and advances

72,000
Total 69,00,000

Calculate Current Ratio and Liquid Ratio.

Solution

1. Current Ratio

`"Current Ratio" = "Current Assets"/"Current Liablities"`

                          = `"24,00,000"/"30,00,000"`

                          = `"0.8 : 1"`

Current Assets = Inventories +Trade Receivables + Cash + Short term Loans and Advances

                       = 12,00,000 + 9,00,000 + 2,28,000 + 72,000

                       = Rs 24,00,000

Current Liabilities = Trade Payables + Short-term Borrowings + Short-term Provisions

                              = 23,40,000 + 6,00,000 + 60,000

                              = Rs 30,00,000     

2. Quick Ratio

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

                       = `"12,00,000"/"30,00,000"`

                       = `0.4 : 1`

Quick Assets = Trade Receivables + Cash + Short term Loans and Advances

                       = 9,00,000 + 2,28,000 + 72,000

                       = Rs 12,00,000

  Is there an error in this question or solution?
Solution Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017. Concept: Types of Ratios.
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