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

General Accounting Principles Ratio analysis

A Company’s Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are Rs 2,00,000, what will be the value of Inventory?

Rs 2,40,000

Rs 3,60,000

Rs 4,00,000

Rs 40,000

Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are Rs 2,00,000

INVENTORY= current assets - liquid assets

=Rs. 6,00,000(WN2)- Rs. 2,40,000(WN1)=Rs.3,60,000

Working note 1 for liquid Ratio:

liquid ratio= liquid assets/current liabilities

= liquid assets =1.2

Rs. 2,00,000 1

LIQUID ASSETS= Rs. 2,00,000*1.2=Rs. 2,40,000

Working Note 2 for current assets

Current assets = liquid Assets/ current liabilities

current Assets = current ratio

Current liabilities

X =3

Rs. 2,00,,000 1

current assets=Rs 2,00,000 * 3 =Rs.6,00,000

By: Abhipedia

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