The working capital of IAN Ltd. is 2,00,000 and its current assets are 6,00,000. What is its current ratio?
Answers
Given:
- The working capital of IAN Ltd is Rs 2,00,000.
- The current assets of the same company are Rs 6,00,000.
To find: The current ratio.
Answer:
Current ratio = Current assets ÷ Current liabilities
We have only the current assets for the formula above. We need to find the current liabilities.
Working capital = Current assets - Current liabilities
Rs 2,00,000 = Rs 6,00,000 - Current liabilities
Current liabilities = Rs 6,00,000 - Rs 2,00,000
Current liabilities = Rs 4,00,000
Now that we have both the current assets and the current liabilities, we're able to find the current ratio.
Current ratio = Rs 6,00,000 ÷ Rs 4,00,000
Current ratio = 6 ÷ 4
Current ratio = 1.5:1
Therefore, the current ratio is 1.5:1.
Explanation:
Solution :
working capital = 2,00,000
current assets = 6,00,000
current ratio = ??
Working Capital = Current assets - Current liabilities
2,00,000 = 6,00,000 - Current liabilities
Current liabilities = 6,00,000 - 2,00,000
Current liabilities = 4,00,000
Current ratio = Current assets / Current liabilities
Current ratio = 6,00,000 / 4,00,000
Current ratio = 1 .5 : 1
Hence, Current ratio is 1 .5 : 1