Question

Calculate Quick Ratio:

Working capital = ₹ 1,70,000, Prepaid expenses = ₹ 10,000, Inventory/Stock = ₹ 15,000, Prepaid expenses = ₹ 10,000, Current liabilities = ₹ 1,25,000, Bank overdraft = ₹ 35,000

Answer 1

Current assets = Current liabilities + Working capital

= 1,25,000 + 1,70,000

= ₹ 2,95,000

Quick assets = Current assets – Inventory – Prepaid expense

= 2,95,000 – 15,000 – 10,000

= ₹ 2,70,000

Quick liabilities = Current liabilities – Bank overdraft

= 1,25,000 – 35,000

= ₹ 90,000

Quick ratio = \(\frac{Quick\,assets}{Quick\,liabilities}\)

= \(\frac{2,70,000}{90,000}\)

= 3 : 1