Question

From the following calculate: (i) Current Ratio; and (ii) Quick Ratio:

	₹		₹
Total Debt	6,00,000	Long-term Borrowings	2,00,000
Total Assets	8,00,000	Long-term Provisions	2,00,000
Fixed Assests (Tangible)	3,00,000	Inventories	95,000
Non-current Investment	50,000	Prepaid Expenses	5,000
Long-term Loans and Advances	50,000

Answer 1

$\begin{array}{l}\text{(i) Current Ratio}\\ \text{Current Assets}=\text{Total Assets}-\text{Fixed Assets}-\text{Non-Current Investment\hspace{0.17em}-\hspace{0.17em}Long term Loans and Advances}\\ =\text{8,00,000}-\text{3,00,000}-\text{50,000}-\text{50,000}=\text{Rs 4,00,000}\\ \text{Current Liabilities}=\text{Total Debt -\hspace{0.17em}Non}-\text{Current Liabilities}\\ =\text{6,00,000}-\text{2,00,000}-\text{2,00,000}=\text{Rs 2,00,000}\\ \mathrm{Current}\mathrm{}\mathrm{Ratio}=\frac{\mathrm{Current}\mathrm{}\mathrm{Assets}}{\mathrm{Current}\mathrm{}\mathrm{Liabilities}}\\ =\frac{\text{4,00,000}}{\text{2,00,000}}=2:1\\ \text{(ii) \hspace{0.17em}Quick\hspace{0.17em}Ratio}\\ \text{Quick Assets}=\text{Current Assets}-\text{Stock}-\text{Prepaid Expenses}\\ =\text{4,00,000}-\text{95},000-5,000=\text{Rs 3,00,000}\\ \mathrm{Quick}\mathrm{}\mathrm{Ratio}=\frac{\mathrm{Quick}\mathrm{}\mathrm{Assets}}{\mathrm{Current}\mathrm{}\mathrm{Liabilities}}\\ \text{=}\frac{3,00,000}{2,00,000}=1.5:1\end{array}$