Question

Share Capital –Rs.500000, 5%Debentures-Rs.200000, Bank loan-Rs.150000, Current Liabilities: Creditors-Rs.75000, Bills Payble-Rs.50000, Bills outstanding-Rs.5000. ASSETS: Land and Building-Rs.350000, Plant & Machinery250000, Current Assets: Cash in Hand-Rs.25000, Cash at Bank-Rs.55000, Sundry Debtors85000, Bills Receivables-105000, Stock-100000, Prepaid Exp-Rs.10000. Based on the above information Calculate- i. CURRENT RATIO ii. ACID TEST RATIO​

Answer 1

Answer:

Current Ratio = Current assets/Current Liabilities

= ₹3,80,000/1,40,000

= ₹2.71:1

Liquid Ratio =

Current Assets - Stock - prepaid expenses/Current Liabilities

= ₹3,80,000-₹1,00,000-₹10,000/₹1,40,000

=₹2,70,000/₹1,40,000

=1.92:1

Explanation:

Current assets = cash in hand+cash at bank+Debtors+Bills receivable+Stock+prepaid expenses.

= ₹25,000+₹55,000+₹85,000+₹1,05,000+₹1,00,000+₹10,000

= ₹3,80,000

Current Liabilities =Creditors+Bills payable+Bills outstanding.

= ₹75,000+₹50,000+₹5,000

= ₹1,40,000