Current ratio=2:1 working capital = 40000 stock = 30000 calculate current assets, current liabilities, quick ratio
Answers
current ratio = current asset / current liabilities
Let current asset = CA
current liabilities = CL
2/1 = CA/CL
cross multiply
CA = 2 CL
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working capital = CA - CL
40000 = CA- CL
substitute CA = 2 Cl
so , 40000 = 2 CL - CL
40000 = Cl
CL = 40000/ 1
CL = 40000
CA = 2 CL
CA = 2* 40000
CA = 80000
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Quick asset = (CA - stock) / CL
= ( 80000 - 30000) / 40000
= 50000 / 40000
= 5/4
Quick asset = 5/4
Quick ratio = 5 : 3
Explanation:
Given:
Current ratio = 2:1
Working capital = 40,000
Stock = 30,000
Current assets = ?
Current liabilities = ?
Quick ratio = ?
Computation:
Working capital = Current assets - Current Liabilities
40,000 = Current assets - Current Liabilities
Current assets = 40,000 + Current liabilities
Current ratio = Current assets / Current liabilities
2 = (40,000 + Current liabilities) / Current liabilities
2 Current liabilities = 40,000 + Current liabilities
Current liabilities = 40,000
Current assets = 40,000 + 40,000
Current assets = 80,000
Quick ratio = (Current assets - Stock) / Current liabilities
Quick ratio = (80,000 - 30,000) / 40,000
Quick ratio = 50,000 / 40,000
Quick ratio = 5 : 4
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