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Question
From the following information, calculate the Liquid Ratio:
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| Current Assets | 4,00,000 | Trade Receivables | 2,00,000 |
| Inventories | 1,00,000 | Current Liabilities | 1,40,000 |
| Prepaid Expenses | 20,000 |
Numerical
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Solution
\[\text{Liquid Assets} = \text{Current Assets} - \text{Inventories} - \text{Prepaid Expenses}\]
Calculation of Liquid Assets:
Current Assets = ₹ 4,00,000
Inventories = ₹ 1,00,000
Prepaid Expenses = ₹ 20,000
$$\text{Liquid Assets} = ₹\ 4,00,000 - ₹\ 1,00,000 - ₹\ 20,000$$
$${\text{Liquid Assets} = ₹\ 2,80,000}$$
Calculation of Liquid Ratio:
$$\text{Liquid Ratio} = \frac{\text{Liquid Assets}}{\text{Current Liabilities}}$$
Current Liabilities = ₹ 1,40,000
$$\text{Liquid Ratio} = \frac{₹\ 2,80,000}{₹\ 1,40,000}$$
$$\text{Liquid Ratio} = \frac{2}{1}$$
$${\text{Liquid Ratio} = 2 : 1}$$
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