Simrit Ltd. has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current assets over quick assets as represented by inventories is Rs. 24,000, What will be the current assets in this case?
Answer & explanation
Correct answer: option 3
Correct answer: Option (3) → Rs. 56,000
Concept: Current Ratio = Current Assets ÷ Current Liabilities and Quick Ratio = Quick Assets ÷ Current Liabilities, from Accounting Ratios.
Let current liabilities = x. Then current assets = 3.5x and quick assets = 2x.
Inventory = Current Assets – Quick Assets = 3.5x – 2x = 1.5x = Rs. 24,000 ⇒ x = Rs. 16,000.
Current Assets = 3.5 × 16,000 = Rs. 56,000.