Question

If the current ratio and liquid ration of a firm are 2.2 and 0.8
respectively and its Current liabilities is Rs. 10 lakhs. The
value of stock held by the firm is Rs. lakhs.
(a) 12
(C) 16
(b) 14
(d) none of the above​

Answer 1

Explanation:

Solution :

Current Ratio =

$\frac{Current \: Assets}{Current \: Liabilities} = 2.2$

Current liabilities is Rs. 10 lakhs.

$\frac{Current \: Assets}{10,00,000} = 2.2$

Current Assets = 2.2 x 10,00,000

= 22,00,000

Current Assets = 22,00,000

Liquid Ratio =

$\frac{Quick \: Assets }{Current \: Liabilities} = 0.8$

$\frac{Quick \: Assets }{10,00,000} = 0.8$

Quick Assets = 10,00,000 × 0.8

= 8,00,000

Quick Assets = 8,00,000

• Stock :

Quick Assets = Current Assets - Stock

= 8,00,000 = 22,00,000 - Stock

Stock = 22,00,000 - 8,00,000

Stock = 14,00,000

Therefore, (option) (b) 14

The value of stock held by the firm is Rs. 14 lakhs.

Answer 2

Answer:

The value of stock held by the firm is Rs.14 lakhs

Explanation:

Given:

Current Ratio= 2.2
Liquid/Quick Ratio= 0.8
Current Liabilities= Rs.10 lakhs

To find out:

The value of stock held by the firm.

Solution:

Now, we know that
Current Ratio= $\frac{CurrentAssets}{Current Liabilities}$
⇒ $2.2$= $\frac{CurrentAssets}{1000000}$
= Rs.22 lakhs
∴ Current Assets= Rs.2200000

Similarly, we know that
Quick Ratio= $\frac{Quick/Liquid Assets}{Current Liabilities}$
⇒ $0.8$= $\frac{Quick/Liquid Assets}{1000000}$
= Rs.8 lakhs
∴ Quick/Liquid Assets= Rs.800000

Now, we know that:

Quick Assets are the assets that are quickly and readily convertible into cash, as and when required.

Formula:
Quick Assets= Current Assets- Prepaid Expenses- Advance Tax- Stock/Inventory
⇒ 800000= 2200000-0-0-Stock/Inventory

⇒ Stock/Inventory= 2200000-800000
= Rs.1400000

∴ The value of stock held by the firm is Rs.1400000