Question : Assertion (A): If working capital is 2,40,000, current assets are 4,000,00, which includes 2,000 in inventory.
There will be a current ratio of 2.5:1.
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 correct.

Question

Question : Assertion (A): If working capital is 2,40,000, current assets are 4,000,00, which includes 2,000 in inventory.
There will be a current ratio of 2.5:1.
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 correct.

Team Careers360 · Accepted Answer

Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Solution : Current Liabilities = Current Assets – Working Capital, i.e.,
₹ 4,00,000 – ₹ 2,40,000 = ₹ 1,60,000
Current Ratio = Current Assets/Current Liabilities
CR = ₹ 4,00,000/₹ 1,60,000 = 2.5 : 1
Hence option 1 is the correct answer.

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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

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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): Current Ratio = Current Assets- Stock /Current Liabilities
Reason (R): If current Assets are 5,25,000, including inventory of 2,00,000 (including Loose Tools 75,000) and working capital is 2,25,000, Current Ratio will be 1.5 : 1

Question : Assertion (A): If current Assets are 5,25,000, including inventory of 2,00,000 (including Loose Tools 75,000) and working capital is 2,25,000, Current Ratio will be 1.83 : 1
Reason (R): Current Ratio = Current Assets/Current Liabilities

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): 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.