Question

Given current ratio = $2.5$
Quick ratio = $1.5$
Net working capital = Rs $30,000$
What is the amount of stock?

• A. $Rs20,000$
• B. $Rs30,000$
• C. $Rs50,000$
• D. $Rs60,000$

Answer 1

The correct option is A $Rs20,000$

Net working capital = Current assets - Current liabilities

$Rs.30000$ = Current assets - Current liabilities

Therefore, Current assets = Current liabilities + $Rs.30000$

Current ratio = Current assets/ Current liabilities

$2.5$ = [Current liabilities + $Rs.30000$] / Current liabilities

$2.5$ Current liabilities = Current liabilities + $Rs.30000$

Current liabilities = $Rs.30000/1.5$

Therefore, Current liabilities = $Rs.20000$

Now,

Current assets = Current liabilities + $Rs.30000$

= $Rs.20000+Rs.30000$

=$Rs.50000$

Now, Quick Ratio = Quick Assets/ Current liabilities

$1.5$ = Quick Assets/ $20000$

Therefore,

Quick Assets = $Rs.30000$

Quick Ratio = Quick Assets/ Current liabilities

Quick Ratio = [Current Assets - Stock ]/ Current liabilities

$1.5$ = [$50000$ - Stock] / $20000$

Stock = $50000-30000$

= $Rs.20000$