Question

From the following data, calculate Current ratio and Liquid Ratio

Liquid Assets ₹75,000

Inventories(Includes Loose Toolsof₹20,000) ₹35,000

Prepaid expenses ₹10,000

Working Capital ₹60,000​

Answer 1

Answer:

current ratio=current asset/current liabilities

current asset=liquid assets + inventory + prepaid expenses

= 75000+35000+10000

= 120000

Working capital= current asset - current liabilities

60000= 120000 - current liabilities

current liabilities= 120000 - 60000

= 60000

Current ratio = 120000/60000 =2/1

=2:1

liquid ratio = liquid assets or quick assets / current liabilities

liquid ratio= 75000/60000= 5/4

= 5:4