Question

From the following information, calculate the Quick Ratio:

Particulars	₹
Total Debt	12,00,000
Total Assets	16,00,000
Property, Plant and Equipment (Fixed Assets)	6,00,000
Non-current Investments	1,00,000
Long-term Borrowings	4,00,000
Long-term Provisions	4,00,000
Long-term Loans & Advances	1,00,000
Inventories	1,90,000
Prepaid Expenses	10,000

Answer 1

Calculation of Current Liabilities:

$$\text{Long-term Debt} = \text{Long-term Borrowings} + \text{Long-term Provisions}$$
$$\text{Long-term Debt} = 4,00,000 + 4,00,000 = {₹\ 8,00,000}$$ 

$$\begin{aligned} \text{Current Liabilities} &= \text{Total Debt} - \text{Long-term Debt} \\ &= 12,00,000 - 8,00,000 \\ &= {₹\ 4,00,000} \end{aligned}$$

Calculation of Current Assets:

$$\begin{aligned} \text{Current Assets} &= \text{Total Assets} - (\text{Fixed Assets} + \text{Non-current Investments} + \text{Long-term Loans \& Advances}) \\ &= 16,00,000 - (6,00,000 + 1,00,000 + 1,00,000) \\ &= 16,00,000 - 8,00,000 \\ &= {₹\ 8,00,000} \end{aligned}$$

Calculation of Quick Assets

$$\begin{aligned} \text{Quick Assets} &= \text{Current Assets} - (\text{Inventories} + \text{Prepaid Expenses}) \\ &= 8,00,000 - (1,90,000 + {10,000}) \\ &= 8,00,000 - 2,00,000 \\ &= {₹\ 6,00,000} \end{aligned}$$

$$\begin{aligned} \text{Quick Ratio} &= \frac{\text{Quick Assets}}{\text{Current Liabilities}} \\ &= \frac{6,00,000}{4,00,000} = {1.5 : 1} \end{aligned}$$