X Ltd. has Current Ratio of 4.5 : 1 and a Quick Ratio of 3 : 1. If its inventory is Rs. 36,000, find out its total Current Assets and total Current Liabilities.

SOLUTION

Current ratio = Current assets / Current liabilities
= 4.5 / 1
Quick ratio = Quick assets / Current liabilities
= 3 / 1

Inventory = 36,000
Let Current Liabilities be = x
Current Assets = 4.5x
Quick Assets = 3x

Stock = Current Assets − Quick Assets
36,000 = 4.5x − 3x
36000 = 1.5x
x = 24,000

Current Assets = 4.5x
= 4.5 × 24,000
= 1,08,000

Liquid Assets = 3x
= 3 × 24,000
= 72,000