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.......
Answer & explanation
Correct answer: option 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