Question

From the following compute (a) Current Ratio (b) Quick Ratio

$\begin{array}{cccccc}\text{S.No}& \text{Items}& \text{Amount}& \text{S.No}& \text{Items}& \text{Amount}\\ & & \text{Rs}& & & \text{Rs}\\ 1.& \text{Current Investments}& \text{40,000}& \text{7.}& \text{Short-term Provisions}& \text{3,000}\\ 2.& \text{Inventories}& \text{5,000}& \text{8.}& \text{Other Current Liabilities}& \text{5,000}\\ 3.& \text{Trade Receivable}& \text{2,000}& \text{9.}& \text{Short-term Loans and Advances}& \text{4,000}\\ 4.& \text{Short-term Borrowings}& \text{20,000}& \text{10.}& \text{Tangible Fixed Assets}& \text{1,00,000}\\ 5.& \text{Trade Payables}& \text{2,500}& \text{11.}& \text{Cash \& Cash Equivalents}& \text{10,000}\\ 6.& \text{Prepaid Expenses}& \text{2,000}& \text{12.}& \text{Advance Tax}& \text{8,000}\end{array}$

Answer 1

(a) Current Ratio = $\frac{\text{Current Assets}}{\text{Current Liabilities}}$

Current Assets = Current Investments + Inventories +Trade Receivables + Prepaid Expenses + Short-term Loans & Advances + Cash & Cash Equivalents + Advance Tax

= Rs. 40,000 + Rs. 5,000 + Rs. 2,000 + Rs. 2,000 + Rs. 4,000 + Rs. 10,000 + Rs. 8,000

= Rs. 71,000

Current Liabilities = Short-term Borrowings + Trade Payables + Short term Provisions + Other Current Liabilities

= Rs. 20,000 + Rs. 2,500 + Rs. 3,000 + Rs. 5,000

= Rs. 30,500

Current Ratio $=Rs\frac{71,000}{30,500}=2.33:1$

(b) Quick Ratio $=\frac{QuickAssets}{CurrentLiabilities}$

Quick Assets = Current Assets - Inventories - Prepaid Expenses - Advance tax

= Rs. 71,000 - Rs. 5,000 - Rs. 2,000 - Rs. 8,000

= Rs. 56,000

Current Liabilities = Short-term Borrowings + Trade Payables + Short term Provisions + Other Current Liabilities

= Rs. 20,000 + Rs. 2,500 + Rs. 3,000 + Rs. 5,000

= Rs. 30,500

Quick Ratio = $Rs.\frac{56,000}{30,500}=1.84:1$