From the following data, calculate Quick Ratio :
Working Capital Rs.2,50,000; Total Debts Rs.4,00,000; Long-term Debt Rs. 3,20,000;
Inventory Rs.2,00,000; Prepaid Expenses Rs. 10,000.
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Answer:
Quick ratio = Liquid assets (Current Assets - inventories)
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Current Liabilities
= 3,00,000 - 60,000
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75,000 (Working Note 1)
= 2,40,000
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75,000
= 3.2 : 1
Working note number 1 - calculation of current liabilities
Working capital = Current Assets - Current liabilities
Current liabilities = Current assets - Working capital.
= 3,00,000 - 2,25,000
= 75,000.
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