Question

On the basis of following information, Capital Employed is:

Total Assets: ₹ 8,80,000, Non-current Assets: ₹ 4,00,000; Current Ratio = 6 : 1.

Options

• ₹ 6,00,000

• ₹ 5,00,000

• ₹ 8,00,000

• ₹ 10,00,000

Answer 1

₹ 8,00,000

Explanation:

\[\text{Current Assets} = \text{Total Assets} - \text{Non-current Assets}\]

$$\text{Current Assets} = ₹8,80,000 - ₹4,00,000 = {₹4,80,000}$$

$$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$$

$$6 = \frac{₹4,80,000}{\text{Current Liabilities}}$$

$$\text{Current Liabilities} = \frac{₹4,80,000}{6} = {₹80,000}$$

$$\text{Capital Employed} = \text{Total Assets} - \text{Current Liabilities}$$

$$\text{Capital Employed} = ₹ 8,80,000 - ₹ 80,000 = {₹ 8,00,000}$$