From the following information, Calculate Current Ratio and Liquid Ratio Current Assets 35,000 Current Liabilities 17,500 Inventory 15,000 Operating Expenses 20,000 Revenue from operations 60,000 Cost of Revenue from operations 30,000 ​

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Answer:

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Given:

  • Current assets = Rs 35,000
  • Current liabilities = Rs 17,500
  • Inventory = Rs 15,000
  • Operating expenses = Rs 20,000
  • RFO [Revenue from Operations] = Rs 60,000
  • Cost of RFO = Rs 30,000

To find: The current ratio and liquid ratio.

Answer:

Current Ratio:

Current ratio = Current assets ÷ Current liabilities

The current assets and the current liabilities are directly given. Substituting them into the formula above,

Current ratio = Rs 35,000 ÷ Rs 17,500

Current ratio = 2:1

Liquid Ratio:

Liquid ratio = Liquid assets/Quick assets ÷ Current liabilities

We only have the current liabilities. We need to find the liquid assets.

Liquid assets = Current assets - Inventory

Liquid assets = Rs 35,000 - Rs 15,000

Liquid assets = Rs 20,000

Now that we have both the values, let's substitute them into the formula.

Liquid ratio = Rs 20,000 ÷ 17,500

Liquid ratio = 1.14:1

Therefore, the current ratio and the liquid ratio are 2:1 and 1.14:1 respectively.

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