Question

Shine Limited has a current ratio 4.5:1 and quick ratio 3:1; if the inventory is 36,000, calculate current liabilities and current assets.

Answer 1

Answer:

Explanation:

Current Ratio = Current Assets/ Current Liabilities

4.5/1 = Current Assets/ Current Liabilities

4.5 Current Liabilities = Current Assets

Quick Ratio = Quick Assets/ Current Liabilities

3:1 = Quick Assets/ Current Liabilities

Current Assets − Quick Assets = 36,000

or, 4.5 Current Liabilities − 3 Current Liabilities = 36,000

or, 1.5 Current Liabilities = 36,000

or, Current Liabilities = 24,000

Thus, Current Assets = 4.5 Current Liabilities

Current Assets = 4.5 × 24000

= 1, 08,000.

Answer 2

$\sf\red{Let\: current\: liabilities\:be \: x. }$

$\sf\red{Current \: ratio= 4.5:1 ; Current \:assets = 4.5x}$

$\sf\red{ Liquid \: ratio = 3:1 ; Liquid \: assets = 3x}$

$\sf\red{Liquid \: assets = Current \: assets - Inventories}$

$\implies$$\sf{3x = 4.5x - 36,000}$

$\implies$$\sf{4.5x -3x = 36,000}$

$\implies$$\sf{1.5x = 36,000}$

$\implies$$\sf{x = \frac{36,000}{1.5}}$

$\implies$$\sf{Current \: liabilities\: (x) =24,000}$

$\sf\red{Current \: assets = Current \:liabilities × Current \: ratio}$

$\implies$$\sf{24,000×4.5}$

$\implies$$\sf{1,08,000}$

$\sf\red{Liquid \: assets = Current \: assets - Inventories}$

$\implies$$\sf{1,08,,000-36,000}$

$\implies$$\sf{72,000}$