Current Liabilities of a company are Rs. 6,00,000. Its Current Ratio is 3: 1 and Liquid Ratio is 1: 1. Calculate value of Inventory

SOLUTION

Current ratio = Quick assets / Current liabilities
= 3 / 1
Acid test ratio = Liquid assets / Current liabilities
= 1 / 1

Current Liabilities = 6,00,000
Current Assets = 3 × Current Liabilities
Current Assets = 3 × 6,00,000
Current Assets = 18,00,000

Liquid Assets = 1 × 6,00,000
= 6,00,000

Inventory = Current Assets − Liquid Assets
= 18,00,000 − 6,00,000
= 12,00,000