Question

Calculate following ratios from the following information: 

(i) Current ratio 

(ii) Liquid ratio 

(iii) Operating Ratio 

(iv) Gross profit ratio 

Current Assets. Rs. 7 35,000 

Current Liabilities Rs 17,500 

Inventory Rs. 15,000 

Operating Expenses Rs. 20,000 

Revenue from Operations Rs. 60,000 

Cost of Revenue from operation Rs. 30,000

Answer 1

(i) Current Ratio = \(\frac {\textit{Current assets}}{\textit{Current Liabilities}} \)

Current Ratio = \(\frac {\textit{35,000}}{\textit{17,500}} \) = 2:1

(ii) Acid Test Ratio = \(\frac {\textit{Liquid assets}}{\textit{Current Liabilities}} \)

Liquid assets = current assets – stock

=  35,000- 15,000 = 20,000
Acid test ratio =  

= 1.143:1