Question

From the following data calculate Current Ratio
Quick asset: 1,50,000
Inventory: 40,000
Prepaid expenses: 10,000
Working capital: 1,20,000​

Answer 1

Answer:

Current Ratio = 2.5 : 1

Explanation:

Given :

Quick asset = 1,50,000

Inventory = 40,000

Prepaid Expenses = 10,000

Working Capital = 1,20,000

To find :

Calculate Current Ratio

Solution :

$\sf{Current\:Ratio =\dfrac{Current \: Assets}{Current \: Liabilities}}$

• Current Assets = ??
• Current Liabilities = ??

Current Assets = Quick Assets + Inventory + Prepaid Expenses

⇒ 1,50,000 + 40,000 + 10,000

⇒ 2,00,000

Current Assets = 2,00,000

Working Capital = Current Assets - Current Liabilities

⇒ 1,20,000 = 2,00,000 - Current Liabilities

⇒ Current Liabilities = 2,00,000 - 1,20,000

Current Liabilities = 80,000

$\sf{Current\:Ratio =\dfrac{Current \: Assets}{Current \: Liabilities} = \dfrac{2,00,000}{80,000} = \dfrac{2.5}{1}}$

Therefore,

Current Ratio = 2.5 : 1

Answer 2

$\large \bf Answer$

Current ratio = current assets/Current Liabilities

Current assets = 1,50,000 + 40,000 + 10,000

Current assets = 1,90,000 + 10,000

Current assets = 2,00,000

Now,

Working capita = 2,00,000 - 1,20,000

Working capital = 80,000

Finding Ratio

2,00,000/80,000

20/8

$\sf Ratio = 2.5 : 1$