Question:
Calculate Current Ratio and Quick Ratio from the following:
- Current Assets: Rs 2,50,000
- Inventory: Rs 70,000
- Prepaid Expenses: Rs 10,000
- Current Liabilities: Rs 1,00,000
Calculate Current Ratio and Quick Ratio from the following:
- Current Assets: Rs 2,50,000
- Inventory: Rs 70,000
- Prepaid Expenses: Rs 10,000
- Current Liabilities: Rs 1,00,000
- Current Assets: Rs 2,50,000
- Inventory: Rs 70,000
- Prepaid Expenses: Rs 10,000
- Current Liabilities: Rs 1,00,000
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Quick Ratio excludes inventory and prepaid expenses because they are not easily convertible into cash.
Updated On: Jul 25, 2025
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Solution and Explanation
Step 1: Calculate Current Ratio
\[ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} = \frac{2,50,000}{1,00,000} = 2.5:1 \]
Step 2: Calculate Quick Assets
\[ \text{Quick Assets} = \text{Current Assets} - \text{Inventory} - \text{Prepaid Expenses} \] \[ = 2,50,000 - 70,000 - 10,000 = 1,70,000 \]
Step 3: Calculate Quick Ratio
\[ \text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}} = \frac{1,70,000}{1,00,000} = 1.7:1 \]
Final Answer:
Current Ratio: 2.5:1
Quick Ratio: 1.7:1
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