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.

Answer 1

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