Question : Assertion (A): If Trade Payables are Rs.80,000, Working Capital is Rs.16,00,000, and Current Liabilities are Rs.6,00,000, the Current Ratio will be 2:1. Reason (R): Current Ratio = Current Assets/Current Liabilities
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False and Reason (R) is False.
Correct Answer: Assertion (A) is False and Reason (R) is False.
Solution : Current Ratio = Current Assets/Current Liabilities Current Assets = Working capital - Current liability Current Assets = 16,00,000-6,00,000= Rs.10,00,000 Current Ratio = 10,00,000/6,00,000=1.67 Hence option 4 is the correct answer.
Question : Assertion (A): Current Assets/Current Liabilities is the formula for calculating the current ratio Reason (R): The current ratio is derived by dividing current assets by current liabilities. Current assets are made up of spare parts, loose tools, and stores.
Question : Assertion (A): If working capital is Rs. 2,40,000, current assets are Rs. 4,000,00, which includes Rs. 2,000 in inventory. There will be a current ratio of 2.5:1. Reason (R): Current Ratio = Current Assets/Current Liabilities
Question : Assertion (A): The ratio that results from dividing current assets by current liabilities is known as the liquid ratio. Reason (R): Liquid Assets/Current Liabilities is the formula for calculating the liquid ratio.
Question : Assertion (A): Current Liabilities are calculated by subtracting Working Capital from Current Assets. Reason (R): Working Capital = Current Assets – Current Liabilities
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