Question

A firm has a current ratio of 3.5 : 1 and a quick ratio of 2 : 1. Assuming inventory at ₹96,000, find out total current assets and total current liabilities.

Hint:

Quick Assets = Current Assets − Inventory.

Answer 1

Step 1: Let Current Liabilities = x \[ \text{Current Assets} = 3.5x \] Quick Assets = Current Assets − Inventory \[ \text{Quick Assets} = 3.5x - 96,000 \] Step 2: Apply Quick Ratio \[ \frac{3.5x - 96,000}{x} = 2 \] \[ 3.5x - 96,000 = 2x \] \[ 1.5x = 96,000 \Rightarrow x = 64,000 \] Step 3: Calculate Current Assets \[ \text{Current Assets} = 3.5 \times 64,000 = ₹2,24,000 \]