Question

If Current Assets are ₹ 12,00,000; Working Capital is ₹ 7,20,000; Inventories are ₹ 3,60,000, Liquid Ratio will be ______.

Options

• 2.5 : 1

• 1 : 1

• 1.75 : 1

• 2 : 1

Answer 1

If Current Assets are ₹ 12,00,000; Working Capital is ₹ 7,20,000; Inventories are ₹ 3,60,000, Liquid Ratio will be 1.75 : 1.

Explanation:

Liquid Ratio = `"Liquid Assets"/"Current Liabilities"`

Liquid Assets = Current Assets − Inventories

= 12,00,000 − 3,60,000

= ₹ 8,40,000

Current Liabilities = Current Assets − Working Capital

= 12,00,000 − 7,20,000

= ₹ 4,80,000

Liquid Ratio = `(8,40,000)/(4,80,000)`

= 1.75 : 1