Question

Find the value of current liabilities and current assets, if current ratio is 2.5:1, liquid ratio is 1.2:1 and the value of inventory of the firm is Rs. 78000/-

Answer 1

Here is your solution:

Liquid assets (LA) = Current assets (CA) – Stock = CA – Rs. 78000

Now, CA/CL, where current ratio is 2.5:1 CA = 2.5CL

Liquid ratio is 1.2:1

LA/CL = 1.2:1

LC/CL = 1.2:1

LA=1.2 CL

CA – Rs 78000 = 1.2CL equation 1

2.5CL – Rs 78000 = 1.2CL equation 2

2.5CL – 1.2CL = 78000

1.3CL = 78000

CL = 78000 / 1.3 = Rs 60,000

Put the value in an equation 2, we get CA = 2.5 * 60,000 = Rs 1,50,000

Put the value in an equation 1, we get LA = 1,50,000 – 78000 = Rs, 72,000