Question : A firm has a Current Ratio of 3.5: 1 and a Quick Ratio of 2: 1. If its inventory is Rs.75,000, total current assets and total current liabilities are
Option 1: Current assets Rs 2,16,000 and current liabilities Rs 48,000
Option 2: Current assets Rs 1,08,000 and current liabilities Rs 24.000
Option 3: Current assets Rs 1,75,000 and current liabilities Rs 50,000
Option 4: None of the above
Correct Answer: Current assets Rs 1,75,000 and current liabilities Rs 50,000
Solution : Answer = Current assets Rs 1,75,000 and current liabilities Rs 50,000
Current Ratio = 3.5:1; Quick Ratio = 2:1; Inventory = Rs.75,000.
C.ratio = $\frac{C.A.}{C.Liab}$= $\frac{3.5}{1}$ = C.A. = 3.5 x C.liab
Quick ratio = $\frac{Q.A.}{C.Liab}$ = Q.A. = 2 x Current liab
Q.A = C.A. - Stock; 2C.Liab = 3.5 C.Liab - 75,000
1.5 Current Liab = 75,000; Current Liab. = Rs 50,000
Total Current Assets = 3.5 (50,000) =
1,75,000.
Hence, the correct option is 3.
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