Question 31 of 47intermediate🔧 ApplyNumerical3 marks

Handa Ltd. has inventory of Rs. 20,000. Total liquid assets are Rs. 1,00,000 and quick ratio is 2 : 1. Calculate current ratio.

Correct Answer

Current Ratio is 2.4 : 1

Exercise: Questions for Practice | Q: 6 | (Page 43)
For More Understanding

Explanation

To solve this, we first determine the Current Liabilities using the provided Quick Ratio and Liquid Assets. Once Current Liabilities are known, we calculate Current Assets by adding Inventory to the Liquid Assets. Finally, the Current Ratio is found by dividing the calculated Current Assets by the Current Liabilities.

Solution Steps

  1. Calculation of Current Liabilities: Quick Ratio = Liquid Assets / Current Liabilities 2 = Rs. 1,00,000 / Current Liabilities Current Liabilities = Rs. 1,00,000 / 2 Current Liabilities = Rs. 50,000

  2. Calculation of Current Assets: Current Assets = Liquid Assets + Inventory Current Assets = Rs. 1,00,000 + Rs. 20,000 Current Assets = Rs. 1,20,000

  3. Calculation of Current Ratio: Current Ratio = Current Assets / Current Liabilities Current Ratio = Rs. 1,20,000 / Rs. 50,000 Current Ratio = 2.4 : 1

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