Question

Following is the balance sheet of Lakshmi Ltd. as of 31st March 2019.

Particulars	₹
I Equity and Liabilities
1. Shareholder's Funds
Equity share capital	4,00,000
2. Non- Current liabilities
Long term borrowings	2,00,000
3. Current Liabilities
(a) Short - term borrowings	50,000
(b) Trade payable	3,10,000
(c) Other current liabilities Expenses Payable	15,000
(d) Short - term provisions	25,000
Total	10,00,000
II Assets
1. Non - Current assets
(a) Fixed assets Tangible assets	4,00,000
2. Current assets
(a) Inventories	1,60,000
(b) Trade debtors	3,20,000
(c) Cash and cash equivalents	80,000
(d) Other current assets prepaid expenses	40,000
Total	10,00,000

Calculate: (i) Current ratio (ii) Quick ratio

Answer 1

Current ratio = `"Current Assets"/"Current liabilities"`

Current Assets = Inventories + Trade Debtors + Cash & Cash equivalents + Prepaid Expenses

= 1,60,000 +3,20,000 + 80,000 + 40,000

= Rs. 6,00,000

Current Liabilities = Short term borrowings + Trade Payable + Expenses payable + Short term provisions.

= 50,000 + 3,10,000 + 15,000 + 25,000

= Rs. 4,00,000

Current ratio = `600000/400000`

Current ratio = 1.5:1

Quick ratio = `"Quick Assets"/"Current liabilities"`

Quick Assets = Current Assets - (Inventors + Prepaid expenses)

Quick Assets = 6,00,000 - (1,60,000 + 40,000)

= Rs. 4,00,000

Quick Ratio = `400000/400000`

Quick Ratio = 1:1