Question

Q. 39. On the basis of following data, the liquid ratio of a company will be : Current Ratio 5:3. Current Liabilities 75,000 and Inventory *25,000 (A) 1:1 (B) 2:1.8 (C) 3:2 (D) 4:3​

Answer 1

Answer:

Option (D) : 4:3

Explanation:

CURRENT RATIO = Current assets : current liabilities

                              =4:3

whereas, LIQUID RATIO = Liquid assets : current liabilities

                                   or  = (current assets - inventory) : current liabilities

                                       = (125000-25000) : 75000

                                      =4:3

WORKING NOTE:

1.     current ratio   =  current assets =  5

                                         75000          3

                 therefore, current assets = 75000 * 5 / 3

                                                           = 125000

                               

Answer 2

ANSWER :

❖ Option (D) 4 : 3

• ✎ If Current Ratio is 5 : 3, Current Liabilities is Rs. 75,000 and Inventory is Rs. 25,000; then the Liquid Ratio will be 4 : 3.

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SOLUTION :

❒ Given :-

• Current Ratio = 5 : 3

• Current Liabilities = Rs. 75,000

• Inventory = Rs. 25,000

❒ To Calculate :-

• Liquid Ratio = ?

❒ Required Formulas :-

• $\dag \: \: \underline{ \boxed{ \sf{ \: Current \: \: Ratio = \dfrac{Current \: \: Assets}{ Current \: \: Liabilities} \: }}}$

• $\dag \: \: \underline{ \boxed{ \sf{ \: Liquid \: \: Ratio = \dfrac{Liquid \: \: Assets}{ Current \: \: Liabilities} \: }}}$

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❒ Calculation :-

It is given that,

• Current Liabilities = Rs. 75,000

• Current Ratio = Rs. 5 : 3

Using the formula of Current Ratio, we get,

• $\circledcirc \: \rm{Current \: \: Ratio = \dfrac{Current \: \: Assets}{ Current \: \: Liabilities}}$

$\longrightarrow \: \rm{ 5 : 3 = \dfrac{Current \: \: Assets}{Rs. 75,000}}$

$\longrightarrow \: \rm{\dfrac{5}{3} = \dfrac{Current \: \: Assets}{Rs. \: 75,000}}$

$\longrightarrow \: \rm{3 \times Current \: \: Assets = 5 \times Rs. \: 75,000}$

$\longrightarrow \: \rm{3 \times Current \: \: Assets = 5 \times Rs. \: 75,000}$

$\longrightarrow \: \rm{3 \times Current \: \: Assets = Rs. \: 375,000}$

$\longrightarrow \: \rm{Current \: \: Assets = \dfrac{Rs. \: 375,000}{3}}$

$\longrightarrow \: \rm{Current \: \: Assets = Rs. \: 1,25,000}$

Here,

• Current Assets = Rs. 1,25,000

• Inventory = Rs. 25,000

So,

• $\circledcirc \: \rm{Liquid \: \: Assets = Current \: \: Assets - Inventory}$

$\longrightarrow \: \rm{Liquid \: \: Assets = Rs. \: 1,25,000 - Rs. \: 25,000}$

$\longrightarrow \: \rm{Liquid \: \: Assets = Rs. \: 1,00,000}$

Now,

• Liquid Assets = Rs. 1,00,000

• Current Liabilities = Rs. 75,000

Using the formula of Liquid Ratio, we obtain,

• $\bigstar \: \tt{Liquid \: \: Ratio = \dfrac{Liquid \: \: Assets}{Current \: \: Liabilities}}$

$\implies \tt{Liquid \: \: Ratio = \dfrac{Rs. 1,00,000}{Rs. \: 75,000}}$

$\implies \tt{Liquid \: \: Ratio = \dfrac{4}{3}}$

$\therefore \tt{Liquid \: \: Ratio = \underline{4 : 3}}$