Question

A Company's Current Ratio is 2.5: 1.0 and its working capital is Rs. 60,000. If its inventory is Rs. 52,000, what will be the liquid Ratio
PRN: 1011903666, NOTE: SCREENSHOT PROHIBITED
А
2.2: 1.0
B.
1.2: 1.0
O
o
С
3.2: 1.0
2.3: 1.0
O
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Answer 1

Answer:

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Answer 2

Concept

Working capital may be a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entities. together with fixed assets like plant and equipment, assets is taken into account an element of capital.

Given

Current Ratio=2.5:1.0

Working capital= Rs. 60000

Inventory= Rs. 52000.

To find

Liquid ratio.

Explanation

We know that working capital= current assets-current liabilities.

and current ratio is 2.5:1.0

2.5/1=current assets/current liabilities

2.5* current liabilities=current assets

Put the present assets= 2.5 * current liabilities

working capital= current assets- current liabilities

60000=2.5*current liabilities-current liabilities

60000=1.5*current liabilities

current liabilities=60000*10/15

current liabilities=Rs.40000

Current assets=2.5*40000

current assets=100000

Liquid assets=current liabilities-inventory

liquid assets=100000-52000

=48000

Liquid ratio =liquid assets/current liabilities

=48000/40000

=6/5

Liquid ratio=6:5.

Hence the liquid ratio is 6:5.

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