Cash Balance ₹5,000; Trade Payables ₹40,000; Inventory ₹50,000; Trade Receivables ₹65,000 and Prepaid Expenses are ₹10,000.

On the basis of above information, Liquid Ratio will be.......

1.75 : 1

The correct answer is option 1- 1.75 : 1.

* Current Assets = Cash + Inventory + prepaid expenses + trade receivables
                            = 5,000 + 50,000 + 10,000 + 65,000
                            = 1,30,000

* Quick assets = Current Assets - Inventory - prepaid expenses
                       = 1,30,000 - 50,000 - 10,000
                       = ₹70,000

* Current Liabilities = Trade payables of ₹40,000

Thus, Liquid ratio = Quick assets / Current liabilities
                             =  70,000/40,000
                             = 1.75 :1