Question

The following information of a company is given:
Current Ratio = 2.8, Acid Test Ratio = 1.5 , Working Capital = Rs.1,62,000
Calculate: (i) Current Ratio (ii) Current Liabilities (iii) Liquid Assets​

Answer 1

Answer:

Current Ratio  =  CA/CL,

      2.8 = CA/CL,

      CA = 2.8 CL ---------------------(1)

And, Quick Ratio = 1.5

Quick Ratio  =  QA/CL

     1.5 = QA/CL

     QA = 1.5 CL ----------------------(2)

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Working Capital Ration Formula:

Working Capital = Current Asset - Current Liabilities

162000 = 2.8 CL - CL                              (By Equation 1, CA = 2.8 CL)

162000 = 1.8 CL

CL = 162000/1.8

Current Liabilities = 90000

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Current Asset = 2.8 CL

Current Asset = 2.8 * 9000

Current Asset = 252000

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Quick Asset = 1.5 CL ----------------------------- (by Equation 2, QA = 1.5 CL)

Quick Asset = 1.5 * 9000

Quick Asset = 60000

Explanation: