Question

Calculate Liquidity ratio 

Current assets – Rs. 20,000 

Prepaid expenses – Rs. 1,000 Stock – Rs. 3,000 

Current liabilities – Rs. 8,000

Answer 1

Liquidity ratio = (Liquid assets)/(Current liabilities)

Liquid assets = Current assets – (stock + Prepaid exp) 

= Rs. 20,000 – (3000+ 1000) 

= Rs. 20,000 – 4000 

= Rs. 16,000 

Current liabilities = Rs. 8,000 

Liquid Ratio = 16,000/8,000

= 2:1