Question

Working Capital 4,80,000; Total Debt 16,00,000; Long Term Debt
10,00,000; Inventory 3,40,000; Prepaid Insurance 20,000. Calculate liquid ratio.

Qvick​

Answer 1

Answer:

Liquid ratio = 1.2 : 1

Explanation:

Current liabilities = Total Debt - Long Term Debt

16,00,000 - 10,00,000 = 6,00,000

Current liabilities = 6,00,000

Working capital = Current assets - Current liabilities

4,80,000 = Current assets - 6,00,000

4,80,000 + 6,00,000 = Current assets

Current asset = 10,80,000

Quick assets = Current assets - Inventory - Prepaid Insurance

10,80,000 - 3,40,000 - 20,000

7,20,000

Quick asset = 7,20,000

Quick ratio = Quick assets / Current liabilities

Quick ratio = 7,20,000 /6,00,000

Quick ratio = 1.2 : 1

Answer 2

Answer:

Quick ratio = 1.2 : 1

Explanation:

Given :

Working Capital = 4,80,000

Total Debt = 16,00,000

Long Term Debt = 10,00,000

Inventory = 3,40,000

Prepaid Insurance = 20,000

To find :

Calculate Liquid ratio

Solution :

Quick ratio = Quick Asset / Current Liabilities

$Quick \: ratio \: = \frac{Quick \: Asset}{Current \: Liabilities}$

★ Find Quick asset and Current liabilities

• Current liabilities = Total Debt - Long Term Debt

⇒ 16,00,000 - 10,00,000

⇒ 6,00,000

Current liabilities = 6,00,000

• Quick assets = Current assets - Inventory - Prepaid Insurance

• Find Current assets :

Working capital = Current assets - Current liabilities

⇒ 4,80,000 = Current assets - 6,00,000

⇒ 4,80,000 + 6,00,000 = Current assets

⇒ 10,80,000 = Current assets

Current assets = 10,80,000

Quick asset = Current assets - Inventory - Prepaid Insurance

⇒ 10,80,000 - 3,40,000 - 20,000

⇒ 7,20,000

Quick asset = 7,20,000

$Quick \: ratio \: = \: \frac{Quick \: Asset}{Current \: Liabilities}$

$Quick \: ratio \: = \: \frac{7,20,000}{6,0,0000}$

.°.

Quick ratio = 1.2 : 1