Multiple Choice Questions on A Company rsquo s Current Ratio is 3 1 and Liquid Ratio is 1 2 1 If its Current Liabilities are Rs2 ........... for Commerce 12th Preparation

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Multiple Choice Questions

A Company rsquo s Current Ratio is 3 1 and Liquid Ratio is 1 2 1 If its Current Liabilities are Rs2 ...........

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    A Company’s Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are Rs2,00,000, what will be the value of Inventory?

    Rs2,40,000

    Incorrect Answer

    Rs3,60,000

    Correct Answer

    Rs4,00,000

    Incorrect Answer

    Rs40,000

    Incorrect Answer
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    Explanation:

    - The Current Ratio is calculated as Current Assets divided by Current Liabilities. Given as 3:1, this means Current Assets are Rs6,00,000 since 3 times Rs2,00,000 equals Rs6,00,000.

    - The Liquid Ratio (Quick Ratio) excludes inventory and prepaid expenses. It is 1.2:1, meaning Quick Assets equal Rs2,40,000 (1.2 times Rs2,00,000).

    - Inventory is part of Current Assets and is calculated by subtracting Quick Assets from Total Current Assets.

    - Current Assets (Rs6,00,000) minus Quick Assets (Rs2,40,000) equals Rs3,60,000 for Inventory.

    Option 2: Rs3,60,000

    By: santosh
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