Question

* Current Ratio is 2:5:1
Working Capital 45,000
Calculate the amount of (o) Current Assets (1) Current Liabilities,​

Answer 1

ANSWER :

• ❖ If the Current Ratio is 2.5 : 1 and Working Capital is Rs. 45,000; then the amount of Current Assets will be Rs. 75,000 and the amount of Current Liabilities will be Rs. 30,000.

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SOLUTION :

❒ Given :-

• Current Ratio = 2.5 : 1

• Working Capital = Rs. 45,000

❒ To Calculate :-

• Amount of Current Assets = ?

• Amount of Current Liabilities = ?

❒ Required Formulas :-

• $\dag \: \: \underline{ \boxed{ \sf{ \: Current \: \: Ratio = \dfrac{Current \: \: Assets }{Current \: \: Liabilities} \: }}}$

• $\dag \: \: \underline{ \boxed{ \sf{ \: Working \: \: Capital = Current \: \: Assets - Current \: \: Liabilities \: }}}$

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❒ Calculation :-

Here,

• Current Ratio = 2.5 : 1

Using the formula of Current Ratio, we get,

• $\bigstar \: \rm{Current \: \: Ratio = \dfrac{Current \: \: Assets }{Current \: \: Liabilities}}$

$\longrightarrow \: \rm{\dfrac{2.5}{1} = \dfrac{Current \: \: Assets }{Current \: \: Liabilities}}$

$\longrightarrow \: \rm{Current \: \: Assets = 2.5 \times Current \: \: Liabilities}$ ----------> Eq. (1)

Again,

• Working Capital = Rs. 45,000

Using the formula of Working Capital, we get,

• $\bigstar \: \rm{Working \: \: Capital = Current \: \: Assets - Current \: \: Liabilities}$

$\longrightarrow \: \rm{Rs. 45,000 = Current \: \: Assets - Current \: \: Liabilities}$

$\longrightarrow \: \rm{Current \: \: Assets - Current \: \: Liabilities = Rs. 45,000}$ ----------> Eq. (2)

Substituting the value of Current Assets from Eq. (1) in Eq. (2), we get,

• ✪ Current Assets - Current Liabilities = Rs. 45,000

⇒ (2.5 × Current Liabilities) - Current Liabilities = Rs. 45,000

⇒ Current Liabilities × (2.5 - 1) = Rs. 45,000

⇒ Current Liabilities × 1.5 = Rs. 45,000

⇒ Current Liabilities = $\tt{\frac{45,000}{1.5}}$

∴ Current Liabilities = Rs. 30,000

Substituting the amount of Current Liabilities in Eq. (1), we get,

• ✪ Current Assets = 2.5 × Current Liabilities

⇒ Current Assets = 2.5 × Rs. 30,000

∴ Current Assets = Rs. 75,000

Hence,

• ⊚ The amount of Current Assets = Rs. 75,000

• ⊚ The amount of Current Liabilities = Rs. 30,000