A Ltd.’s Liquidity Ratio is 2.5: 1. Inventory is Rs. 6,00,000. Current Ratio is 4: 1. Find out the Current Liabilities.

SOLUTION

Current ratio = Current assets / Current liabilities
= 4 / 1

Quick ratio = Quick assets / Current liabilities
= 2.5 / 1

Let the Current Liabilities be = x
Current Assets = 4x
Quick Assets = 2.5x

Stock = Current Assets − Quick Assets
6,00,000 = 4x − 2.5x
6,00,000 = 1.5x
x = 6,00,000 / 1.5
x = 4,00,000

Current Liabilities = x 
= 4,00,000


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