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CBSE Class 12-commerce Answered

Z Ltd.has a current ratio of 3.5:1 and quick ratio of 1.5:1. If the excess of current assets over quick assets as represented by inventory is 60,000; calculate current assets and current liabilities
Asked by anju04mehta | 15 Jan, 2019, 07:35: PM
answered-by-expert Expert Answer
Given Information:
Current Ratio = 3.5:1; Liquid Ratio = 1.5:1; Inventory = 60,000.
 
Solution:
Let Current Liabilities be Rs.X
Current Ratio = Current Assets/Current Liabilities = 3.5 :1; therefore,  Current Assets * 1 = Current Liabilities * 3.5 
Substituting value of X we get, Current Assets = 3.5X
 
Also, Liquid Ratio = Liquid Assets / Current Liabilities = 1.5 :1; therefore, Liquid Assets * 1 = Current Liabilites * 1.5
Substituting value of X we get, Liquid Assets = 1.5X
 
We know that excess of Current Assets over Liquid Assets is Inventory, therefore, Current Assets - Liquid Assets = Inventory
Substituting the values given and derived above, 3.5X - 1.5X = 60,000; 
Solving the above 2X = 60,000; X = 30,000. 
 
Current Liabilities = 30,000
Current Assets = 3.5 * 30,000 = 1,05,000
Liquid Assets = 1.5 * 30,000 = 45,000
 
Answered by Surabhi Gawade | 16 Jan, 2019, 09:28: AM

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