| Particulars | Note No. | Amount (Rs.) |
| I. EQUITY AND LIABILITIES : 1. Shareholder’s Funds : | ||
| (a) Share Capital | 70,000 | |
| (b) Reserves and Surplus | 35,000 | |
| 2. Non-Current Liabilities : | ||
| Long-term Borrowings | 25,000 | |
| 3. Current Liabilities : | ||
| (a) Short-term Borrowings | 3,000 | |
| (b) Trade Payables (Creditors) | 13,000 | |
| (b) Short-term Provisions: Provision for Tax | 4,000 | |
| Total | 1,50,000 | |
| II. ASSETS : | ||
| 1. Non-Current Assets | ||
| (a) Fixed Assets (Tangible) | 45,000 | |
| (b) Non-current Investments | 5,000 | |
| 2. Current Assets | ||
| (a) Inventories (Stock) | 50,000 | |
| (b) Trade Receivables (Debtors) | 30,000 | |
| (c) Cash and Cash Equivalents | 20,000 | |
| Total | 1,50,000 |
Compute Current Ratio and Liquid Ratio
SOLUTION
Current Assets = Inventory + Trade Receivables + Cash and Cash Equivalents
= 50,000 + 30,000 + 20,000
= 1,00,000
Current Liabilities = Short-term Borrowings + Trade Payables + Provision for Tax
= 3,000 + 13,000 + 4,000
= 20,000
Quick Assets = Trade Receivables + Cash and Cash Equivalents
= 30,000 + 20,000
= 50,000
Current ratio = Current Assets / Current liabilities
= 1,00,000 / 20,000
= 5: 1
Quick ratio = Liquid Assets / Current liabilities
= 50,000 / 20,000
= 2.5: 1
Comments:
1. Ideal Current Ratio for a business is considered to be 2: 1. But in this case the ratio is quite high i.e., 5: 1. This may be due to the following reasons:
(i) Blockage of Funds in Stock
(ii) High Amount outstanding from Debtors
(iii) Huge Cash and Bank Balances
2. Ideal Quick Ratio of a business is supposed to be 1: 1. This implies that Liquid Assets should be equal to the Current Liabilities. But in the given case Quick Ratio is 2.5: 1 which indicates that the Liquid Assets are quite high in comparison to the Current Liabilities.