Current ratio of a firm is 9 4 Its current liabilities are Rs 1 20 000 Inventory is Rs 30 000 Its li...........

General Accounting Principles Ratio analysis

Current ratio of a firm is 9 : 4. Its current liabilities are Rs 1,20,000. Inventory is Rs 30,000. Its liquid ratio will be :

1 : 1

1.5 : 1

2 : 1

1.6 : 1

Current ratio of a firm is 9 : 4. Its current liabilities are Rs 1,20,000. Inventory is Rs 30,000

Liquid Ratio = liquid Assets/ current liabilities

= Rs.2,40,000(WN1)

Rs.1,20,000

= Rs.2,40,000/ Rs.1,20,000

= 2: 1 (answer)

Working note 1 for liquid assets

liquid assets= current assets - inventory= Rs2,70,000(WN2)- Rs.30,000=Rs.2,40,000

Working Note 2 for current assets

Current assets = liquid Assets/ current liabilities

current Assets = current ratio

Current liabilities

X =9

Rs 1,20,,000 4

current assets=Rs 1,20,000 * 9 =Rs.10,80,000/ 4= Rs. 2,70,000

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