Question

Current ratio is 3:5 working capital is 900000. Calculate the amount of current assets and liabilities

Answer 1

Current ratio = 3 : 5

current ratio = current asset ÷ current liabilities

Let us current asset = CA

current liabilities = CL

         3 ÷ 5    = CA  ÷ CL

    Cross multiply

3 CA =  5 CL  

CA  = 5 CL / 3   -  equation

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working capital = CA- CL

       900000     =  (5 CL / 3) - CL

        900000  = ( 5CL - 3Cl ) / 3

      900000* 3  = 2 CL

    27,00,000 = 2CL

  CL= 27,00,000 /2

  CL= 13,50,000

Current liabilities = 13,50,000

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Current asset =  5 Current liabilities / 3

                       = (5 * 13,50,000 ) 3

                       = 67,50,000 / 3

                         =22,50,000

Current asset  = 22,50,000

Answer 2

Information provided with us :

• Current ratio is 3 : 5
• Working capital is 900000.

What we have to calculate :

• Amount of current assets and liabilities?

Performing Calculations :

As we have, current ratio that is 3 : 5

So,

As we know the formula of current ratio,

• Current ratio = Current assets / Current liabilities

By using it we gets,

=> 3 : 5 = Current assets / Current liabilities

=> 3 / 5 = Current assets / Current liabilities

=> 0.6 = Current assets / Current liabilities

=> Current assets = 0.6Current liabilities

Therefore, 1 current asset is equal to 0.6Current liabilities. And we would be assuming current liabilities as an variable so we would be assuming it as a. As current liabilities is assumed as "a" so current assets would be (0.6 × a = 0.6a)

★ Formula of working capital :-

• Working capital = Current assets - Current liabilities

By using the formula we would be getting,

>> 900000 = 0.6a - a

>> 900000 = 0.4a

>> a = 900000 / 0.4

>> a = 900000 × 10 / 4

>> a = 9000000 / 4

>> a = 22,50,000

Therefore, value of a is 22,50,000

Finding out current assets,

>> Current assets = 0.6a

>> Current assets = 0.6 (2250000)

>> Current assets = 0.6 × 2250000

>> Current assets = 6 × 225000

>> Current assets = 1,350,000

Amount of current assets is 2250000 and current liabilities is 1,350,000.