current ratio is 2.5 and the liquid ratio is 1.5. working capital is ₹ 75,000. the value of the stock in inr held will be

get current ratio is 2.5 and the liquid ratio is 1.5. working capital is ₹ 75,000. the value of the stock in inr held will be from screen.

Current Ratio is 2.5, Working Capital is ई 1,50,000. Calculate the amount of Current Assets and Current Liabilities.

Current Ratio is 2.5, Working Capital is ई 1,50,000. Calculate the amount of Current Assets and Current Liabilities.

Byju's Answer Standard XII Accountancy

Cash Flow from Investing Activities

Current Ratio... Question

Current Ratio is 2.5, Working Capital is ₹ 1,50,000. Calculate the amount of Current Assets and Current Liabilities.

Open in App Solution

CurrentRatio=CurrentAssetsCurrentLiabilities2.5=Current AssetsCurrent LiabilitiesCurrent Assets=2.5Current LiabilitiesWorkingCapital=CurrentAssets-CurrentLiabilities1,50,000=2.5Current Liabilities−Current LiabilitiesCurrent Liabilities=1,50,0001.5Current Liabilities=Rs 1,00,000Current Assets=2.5Current LiabilitiesCurrent Assets=2.5×1,00,000=Rs 2,50,000

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SIMILAR QUESTIONS

Q.

Current Ratio is 3.5 : 1. Working Capital is Rs. 90,000. Calculate the amount of Current Assets and Current Liabilities.

Q. From the following calculate:

(a) Current Ratio; and

(b) Working Capital Turnover Ratio.

₹

(i) Revenue from Operations 1,50,000

(ii) Total Assets 1,00,000

(iii) Shareholders' Funds 60,000

(iv) Non-current Liabilities 20,000

(v) Non-current Assets 50,000

Q. Current Liabilities of a company are ₹ 1,50,000. Its Current Ratio is 3 : 1 and Acid Test Ratio (Liquid Ratio) is 1 : 1. Calculate values of Current Assets, Liquid Assets and Inventory.Q.

(a) Current Liabilities of a Company are Rs. 3,50,000. Its current ratio is 3 : 1 and acid test ratio is 1.75 : 1. Calculate the value of Current assets, Liquid assets and Inventories.

(b) Current Assets of a Company are Rs. 3,60,000. Its Current ratio is 2.4:1 and acid test ratio is 1.3:1. Calculate the value of Current liabilities, liquid assets and inventories.

(c) Working Capital of a company is Rs,30,000. Its Current ratio is 2.5:1. Calculate the value of (i) Current assets, (ii) Current liabilities, (iii) Acid test ratio, assuming inventories of Rs. 26,000.

Q.

Current ratio is 4 and quick ratio is 2.5 and working capital is Rs 6,00,000. Find out Current Assets and Current Liabilities and Inventory and Quick Asset.

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Current Ratio 2.5 , Liquid Ratio 1.5 and Working Capital Rs. 60,000 . What is the amount of Current Assets?

Click here👆to get an answer to your question ✍️ Current Ratio 2.5 , Liquid Ratio 1.5 and Working Capital Rs. 60,000 . What is the amount of Current Assets?

Question

Current Ratio 2.5, Liquid Ratio 1.5 and Working Capital Rs.60,000. What is  the amount of Current Assets?

A

Rs.60,000

B

Rs.80,000

C

Rs.1,00,000

D

Rs.1,20,000

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Updated on : 2022-09-05

Solution Verified by Toppr

Correct option is C)

Current Ratio = Current Assets (C.A)/ Current Liabilities (C.L)  = 2.5

So, CA= 2.5 CL

Now, Working Capital = Current Assets(C.A) minus Current Liabilities (C.L) = Rs.60000

So, C.A - C.L = 60000

2.5 C.L-CL = 60000 C.L = Rs.40000

Now, C.A = 2.5 x 40000 = Rs.100000

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Current Ratio Explained With Formula and Examples

The current ratio is a liquidity ratio that measures a company’s ability to cover its short-term obligations with its current assets.

CORPORATE FINANCE FINANCIAL RATIOS

Current Ratio Explained With Formula and Examples

By JASON FERNANDO Updated March 03, 2023

Reviewed by THOMAS BROCK

Fact checked by SKYLAR CLARINE

Investopedia / Lara Antal

What Is the Current Ratio?

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables.

A current ratio that is in line with the industry average or slightly higher is generally considered acceptable. A current ratio that is lower than the industry average may indicate a higher risk of distress or default. Similarly, if a company has a very high current ratio compared with its peer group, it indicates that management may not be using its assets efficiently.

The current ratio is called current because, unlike some other liquidity ratios, it incorporates all current assets and current liabilities. The current ratio is sometimes called the working capital ratio.

KEY TAKEAWAYS

The current ratio compares all of a company’s current assets to its current liabilities.

These are usually defined as assets that are cash or will be turned into cash in a year or less and liabilities that will be paid in a year or less.

The current ratio helps investors understand more about a company’s ability to cover its short-term debt with its current assets and make apples-to-apples comparisons with its competitors and peers.

One weakness of the current ratio is its difficulty of comparing the measure across industry groups.

Others include the overgeneralization of the specific asset and liability balances, and the lack of trending information.

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Using The Current Ratio

Formula and Calculation for the Current Ratio

To calculate the ratio, analysts compare a company’s current assets to its current liabilities.

1

Current assets listed on a company’s balance sheet include cash, accounts receivable, inventory, and other current assets (OCA) that are expected to be liquidated or turned into cash in less than one year.

2

Current liabilities include accounts payable, wages, taxes payable, short-term debts, and the current portion of long-term debt.

3

\begin{aligned} &\text{Current Ratio}=\frac{\text{Current assets}}{ \text{Current liabilities}} \end{aligned}

​ Current Ratio= Current liabilities Current assets ​ ​

Understanding the Current Ratio

The current ratio measures a company’s ability to pay current, or short-term, liabilities (debts and payables) with its current, or short-term, assets, such as cash, inventory, and receivables.

1

In many cases, a company with a current ratio of less than 1.00 does not have the capital on hand to meet its short-term obligations if they were all due at once, while a current ratio greater than 1.00 indicates that the company has the financial resources to remain solvent in the short term. However, because the current ratio at any one time is just a snapshot, it is usually not a complete representation of a company’s short-term liquidity or longer-term solvency.

For example, a company may have a very high current ratio, but its accounts receivable may be very aged, perhaps because its customers pay slowly, which may be hidden in the current ratio. Some of the accounts receivable may even need to be written off. Analysts also must consider the quality of a company’s other assets vs. its obligations. If the inventory is unable to be sold, the current ratio may still look acceptable at one point in time, even though the company may be headed for default.

Interpreting the Current Ratio

A ratio under 1.00 indicates that the company’s debts due in a year or less are greater than its assets—cash or other short-term assets expected to be converted to cash within a year or less. A current ratio of less than 1.00 may seem alarming, although different situations can negatively affect the current ratio in a solid company.

For example, a normal cycle for the company’s collections and payment processes may lead to a high current ratio as payments are received, but a low current ratio as those collections ebb. Calculating the current ratio at just one point in time could indicate that the company can’t cover all of its current debts, but it doesn’t necessarily mean that it won’t be able to when the payments are due.

Additionally, some companies, especially larger retailers such as Walmart, have been able to negotiate much longer-than-average payment terms with their suppliers. If a retailer doesn’t offer credit to its customers, this can show on its balance sheet as a high payables balance relative to its receivables balance. Large retailers can also minimize their inventory volume through an efficient supply chain, which makes their current assets shrink against current liabilities, resulting in a lower current ratio. Walmart’s current ratio as of January 31, 2023 was 0.82.

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