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
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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
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