Question

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

Answer 1

Working Capital = Current Assets – Current Liabilities

Working Capital = Rs. 90,000

Current Ratio = 3.5 : 1 = $\frac{CurrentAssets}{CurrentLiabilities}$

Or

1 Current Assets = 3.5 Current Liabilities

Let current liabilities be x.

Then current assets = 3.5x

Working Capital = Current Assets – Current Liabilities

90,000 = 3.5 x – x

90,000 = 2.5 x;
x = $\frac{90,000}{2.5}$

x = 36,000 = Current Liabilities

Current Assets = 3.5x = 3.5 $\times$ 36,000 = Rs. 1,26,000