Question

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.

Answer 1

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

= $\frac{4}{1},$ Current Assets = $4\times$ Current Liabilities ...(i)

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

= $\frac{2.5}{1},$ Quick Assets = $2.5\times$ Current Liabilities ...(ii)

Working Capital = Current Assets - Current Liabilities

6,00,000 = 4 Current Liabilities - Current Liabilities [From (i)]

3 Current Liabilities = 6,00,000

Current Liabilities = $\frac{6,00,000}{3}=\text{Rs}2,00,000$

Current Assets = $4\times 2,00,000=\text{Rs}8,00,000$

Quick Assets = $2.5\times 2,00,000=\text{Rs}5,00,000$

Inventory = Current Assets - Quick Assets

= $8,00,000-5,00,000=\text{Rs}3,00,000$