Financial Statements

Ratios

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Financial Statements

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?

Rs. 32,000

Rs. 16,000

Rs. 56,000

Rs. 28,000

✅ Correct Option: 3

The difference between the two ratios, $3.5 - 2 = 1.5$ , represents inventory of $24,000$ . So one unit, that is current liabilities, $= 24,000 / 1.5 = 16,000$ . Current assets $= 3.5 \times 16,000 = 56,000$ .

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Match List-I with List-II

List-I (Accounting Ratio)	List-II (Objectives/ Use of Accounting Ratio)
(A) Liquidity Ratio	(I) To know the earning capacity of the business
(B) Profitability Ratio	(II) To know the ability to pay long-term obligations
(C) Solvency Ratio	(III) To know the efficiency of business operations
(D) Activity Ratio	(IV) To know the ability to pay short-term obligations

Choose the correct answer from the options given below:

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?

Solution

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