Question

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.​

Answer 1

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.