Question

9. Current Assets 4,00,000; Current Liabilities 2,00,000 and Inventory is 50,000. Liquid Ratio will be : (A) 2:1 (B) 2.25 : 1 (C) 4:7 (D) 1.75: 1​

Answer 1

Answer:

Liquid ratio =  1.75: 1​

Explanation:

Among the various options given in question statement the correct option is the last one.

Liquid ratio determines the ability of any company or person about how easily and quickly it can converts its assets to money for paying liabilities

According to the information given; it will be;

Liquid ratio = (Current Assets - Inventory ) / current liabilities

Liquid ratio = 4,00,000 - 50,000 / 2,00,000

Liquid ratio = 3,50,000 / 2,00,000

Liquid ratio =  1.75: 1​

Answer 2

Given:

Current Assets = 4,00,000

Current Liabilities = 2,00,000

Inventory = 50,000

To Find:

The liquid ratio

Solution:

The inventory will be subtracted from the current assets.

Thus,

Current assets = 4,00,000 - 50,0000

= 3,50,000

Using the formula of liquid ratio -

Liquid ratio = Current Assets  / current liabilities

 = 3,50,000 / 2,00,000

= 35/20

=  1.75: 1​

Answer: The liquid ratio is  (D) 1.75: 1​