Question

Calculate Current Ratio:

Liquid Assets- Rs 187500 Inventory-Rs.50000
Prepaid Expenses-Rs 12500 Workings Capital-Rs 150000​

Answer 1

Answer:

Current Ratio = 2.5 : 1

Explanation:

Given :

• Liquid Assets = Rs. 1,87,500
• Inventory = Rs. 50,000
• Prepaid Expenses = Rs. 12,500
• Working Capital = Rs. 1,50,000

To find :

• Current Ratio

Solution :

★ Current Ratio =

$\dfrac{Current \: Assets}{Current \: Liabilities}$

• Current Assets = Liquid Assets + Inventory + Prepaid Expenses

⇒ 1,87,500 + 50,000 + 12,500

⇒ 2,50,000

Current Assets = Rs. 2,50,000

• Working Capital = Current Assets - Current Liabilities

⇒ 1,50,000 = 2,50,000 - Current Liabilities

⇒ Current Liabilities = 2,50,000 - 1,50,000

Current Liabilities = Rs. 1,00,000

★ Current Ratio =

$\dfrac{Current \: Assets}{Current \: Liabilities}$

$\dfrac{2,50,000}{1,00,000} \: = 2.5 : 1$

Current Ratio = 2.5 : 1

Therefore, Current Ratio = 2.5 : 1