Current Ratio

Q.

A business has earned average profits of Rs.1, 00, 000 during the last few years. Find out the value of goodwill by capitalisation method, given that the assets of the business are Rs.10, 00, 000 and its external liabilities are Rs. 1, 80, 000. The normal rate of return is 10%.

Q.

The Current Ratio of a Company is 2 : 1. State, giving reasons which of the following transactions would (i) improve, (ii) reduce of (iii) not alter, the current ratio:

(a) Repayment of a Current Liability

(b) Purchasing goods on credit

(c) Sale of an Office Equipment for Rs. 4, 000 (Book Value Rs. 5, 000)

(d) Sale of goods for Rs. 11, 000 (Cost Rs 10, 000)

(e) Redemption of Debentures.

Q.

Current Ratio is 3.5 : 1. Working Capital is Rs. 90, 000. Calculate the amount of Current Assets and Current Liabilities.

Q. From the Following information calculate Gross Profit Ratio, Stock Turnover Ratio and Debtors Turnover Ratio.

$$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{Sales}& 3,00,000\\ \text{Cost of Goods Sold}& 2,40,000\\ \text{Closing Stock}& 62,000\\ \text{Gross Profit}& 60,000\\ \text{Opening Stock}& 58,000\\ \text{Debtors}& 32,000\end{array}$$

Q. Compute Gross Profit Ratio, Working capital Turnover Ratio, Debt Equity Ratio, and Proprietary Ratio from the following information

$$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{Paid - up Capital}& 5,00,000\\ \text{Curret Assets}& 4,00,000\\ \text{Net Sales}& 10,00,000\\ \text{13\% Debentures}& 2,00,000\\ \text{Current Liability}& 2,80,000\\ \text{Cost of Goods Sold}& 6,00,000\end{array}$$

Q.

Shine Limited has a current ratio 4.5:1 and quick ratio 3:1; if the stock is Rs. 36, 000, calculate current liabilities and current assets.

Q.

The ideal level of current ratio is___

1. 4:2

2. 2:1

3. 4:2 or 2:1

4. None of these

Q.

On the basis of the following information, calculate :

(i) Debt-Equity Ratio and

(ii) Working Capital Turnover Ratio

Information :

$\begin{array}{cc}& \text{Rs.}\\ \text{Net Revenue from Operations}& \text{60, 00, 000}\\ \text{Cost of Revenue from Operations}& \text{45, 00, 000}\\ \text{Other Current Assets}& \text{11, 00, 000}\\ \text{Current Liabilities}& \text{4, 00, 000}\\ \text{Paid up Share Capital}& \text{6, 00, 000}\\ \text{6\% Debentures}& \text{3, 00, 000}\\ \text{9\% Loan}& \text{1, 00, 000}\\ \text{Debenture Redemption Reserve}& \text{2, 00, 000}\\ \text{Closing Inventory}& \text{1, 00, 000}\end{array}$

Q.

Index number for the base period is always taken as ______

Q.

Cash Revenue from Operations (Cash Sales) Rs. 2, 00, 000

Credit Revenue from Operations (Credit Sales) Rs. 4, 00, 000

Gross Profit Rs. 1, 00, 000

Inventory Turnover Ratio 5 Times

Calculate the value of Opening and Closing Inventory in eash of the following alternative cases :

Case I If closing inventory was Rs. 80, 000 in excess of opening inventory.

Case II If closing inventory was 3 times that in the beginnning.

Case III If closing inventory was 3 times more than that in the beginning.

Case IV If opening inventory was $\frac{1}{3}$ rd of inventory at the end.

Q.

Why Is Goodwill an Asset?

Q.

Calculate Current Ratio if Stock is Rs. 6, 00, 000; Liquid Assets Rs. 24, 00, 000; Quick Ratio 2 : 1.

Q.

The ratio of Current Assets (Rs. 6, 00, 000) to Current Liabilities (Rs. 4, 00, 000) is 1.5 : 1. The accountant of the firm is interested in maintaing a current ratio of 2 : 1, by paying off a part of the Current Liabilities. Compute the amount of Current Liabilities that should be paid, so that the current ratio at the level of 2 : 1 may be maintained.

Q.

Is insurance a fixed asset?

Q.

Under which major heading and sub-heading will the following items be presented in the Balance Sheet of a company as per the Schedule III of the Companies Act, 2013.

(i) Copyrights

(ii) Cheques

(iii) Capital Redemption Reserve

(iv) Stock of Finished Goods

Q. Ideal current ratio is:

1. 2:1
2. 1:2
3. 3:2
4. 1:3

Q.

Calculate Trade Receivable Turnover Ratio and Average Collection Period from the following :

$\begin{array}{cc}& \text{Rs.}\\ \text{Total Revenue from Operations for the year (Total Sales)}& 4,00,000\\ \text{Closing Trade Receivable}& \text{1, 00, 000}\\ \text{Excess of Closing Trade Receivables over Opening Trade Receivables}& \text{40, 000}\end{array}$

Cash Revenue from Operations (Cash Sales):
Being 25 % of Credit Revenue from Operations

Q. is not a current asset.

1. Inventory
2. Prepaid expense
3. Furniture
4. Cash balance

Q.

Current liabilities of a company are Rs. 75, 000. If Current ratio is 4 : 1 and liquid ratio 1 : 1, calculate value of current assets, liquid assets and stock.

Q.

Handa Limited has stock of Rs. 20, 000. Total liquid assets are Rs. 1, 00, 000 and quick ratio is 2 : 1, Calculate current ratio.

Q.

Quick ratio is 1.8 : 1, current ratio is 2.7 : 1 and current liabilities are Rs 60, 000. Determine value of stock.

1. Rs 54, 000

2. Rs 60, 000

3. Rs 1, 62, 000

4. None of these

Q.

Which ratio is considered as safe margin of solvency?

1. Quick ratio

2. Current ratio

3. None of these

4. Liquid ratio

Q. From the following calculate
(a) Debt Equity Ratio
(b) Total Assets To Debt Ratio
(c) Propietory Ratio

$$\begin{array}{cc}\text{Items}& \text{Amt. (Rs.)}\\ \text{Equity Share Capital}& 75,000\\ \text{Preference Share Capital}& 25,000\\ \text{General Reserve}& 50,000\\ \text{Accumulated Profits}& 30,000\\ \text{Debentures}& 75,000\\ \text{Sundry Creditors}& 40,000\\ \text{Outstanding Expenses}& 10,000\\ \text{Preliminary Expenses to be written off}& 5,000\end{array}$$

Q.

Calculate Trade Payables Turnover Ratio from the following information :

$\begin{array}{cc}& \text{Rs.}\\ \text{Credit Purchases during the year}& 6,20,000\\ \text{Purchase Returns (Out of credit purchase)}& 20,000\\ \text{Opening Creditors}& 1,00,000\\ \text{Closing Creditors}& \text{1, 40, 000}\\ \text{Opening Bills Payable}& \text{25, 000}\\ \text{Closing Bills Payable}& \text{35, 000}\end{array}$

Q.

The current ratio of a company is 2.5:1. Which of the following transactions would not change it?

1. Payment to trade creditors

2. Selling machinery for cash

3. Purchase of goods on credit

4. Issue of equity shares

Q. Current assets divided by current liabilities is the ratio.

1. liquid
2. non-current
3. fixed
4. current

Q.

Current ratio is 4 and quick ratio is 2.5 and working capital is Rs 6, 00, 000. Find out Current Assets and Current Liabilities and Inventory and Quick Asset.

Q.

Is inventory a fixed asset?

Q.

Calculate Total Assets to Debt Ratio from the following information :

$\begin{array}{cccc}\text{Particulars}& \text{Rs.}& \text{Particulars}& \text{Rs.}‘\\ \text{Long-term Borrowings}& 18,00,000& \text{Share Capital}& \text{10, 00, 000}\\ \text{Long-term Provisions}& 2,00,000& \text{Security Premium Reserve}& \text{3, 00, 000}\\ \text{Trade Payables}& 5,00,000& \text{General Reserve}& \text{5, 00, 000}\\ & & \text{Surplus i.e., Balance in}& \\ & & \text{Statement of Profit and Loss}& \text{(2, 00, 000)}\end{array}$

Q.

Which of the following is not a current asset?

1. Inventory

2. Prepaid insurance

3. Fixtures

4. None of these