A Company's Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are Rs2,00,000, what will be the value of Inventory?
Answer & explanation
Correct answer: option 2
Current Ratio= Current Assets/Current Liabilities
3/1=Current Assets/2,00,000
Current assets = 3 x 200000
Current Assets=6,00,000
Liquid Ratio= (Current Assets-Inventory)/Current Liabilities
1.2/1=(6,00,000-Inventory)/2,00,000
1.2/1 X 200000 = (6,00,000-Inventory)
240000 = (6,00,000-Inventory)
Inventory=3,60,000