A Company’s liquid assets are ₹5,00,000 and its current liabilities are ₹3,00,000. Thereafter,it paid 1,00,000 to its trade payables. Quick ratio will be:a.`2 : 1b.2.5 : 1c.1.67 : 1d.1.33 : 1
Question
A Company’s liquid assets are ₹5,00,000 and its current liabilities are ₹3,00,000. Thereafter,it paid 1,00,000 to its trade payables. Quick ratio will be:a.`2 : 1b.2.5 : 1c.1.67 : 1d.1.33 : 1
Solution
To calculate the quick ratio, we need to determine the company's quick assets and current liabilities. Quick assets include cash, cash equivalents, and accounts receivable.
Given that the company's liquid assets are ₹5,00,000, we can assume that this amount represents the company's quick assets.
Next, we need to consider the effect of paying ₹1,00,000 to trade payables. Since trade payables are part of current liabilities, this payment will reduce the current liabilities.
Initially, the current liabilities were ₹3,00,000. After paying ₹1,00,000 to trade payables, the new current liabilities will be ₹2,00,000 (₹3,00,000 - ₹1,00,000).
Now, we can calculate the quick ratio by dividing the quick assets by the current liabilities.
Quick Ratio = Quick Assets / Current Liabilities
Quick Ratio = ₹5,00,000 / ₹2,00,000
Quick Ratio = 2.5
Therefore, the quick ratio will be 2.5 : 1.
Hence, the correct answer is option b. 2.5 : 1.
Similar Questions
Current Assets ₹4,00,000; Current Liabilities ₹2,00,000 and Inventory is ₹50,000. Quick Ratio will be :a.`2 : 1b.1.75 : 1c.`4 : 7d.`2.25 : 1
The Current ratio of a firm is 2.5:1 and its Current liabilities are ₹ 4, 00,000. Its working capitalwill be:(a) ₹ 6,00,000 (b) ₹ 7,50,000 (c) ₹ 8,00,000 (d) ₹ 14,00,000611
Cash Balance ₹15,000; Trade Receivables ₹35,000; Inventory ₹40,000; Trade Payables ₹24,000 and Bank Overdraft is ₹6,000. Current Ratio will be :a.`3 : 1b.`3.75 : 1c.`1 : 3.75d.`1 : 3
On the basis of following data, a Company’s Total Assets-Debt Ratio will be: Working Capital ₹2,70,000; Current Liabilities ₹30,000; Fixed Assets ₹4,00,000; Debentures ₹2,00,000; Long Term Bank Loan ₹80,000.a.0.37b.0.7c.0.45d.0.4
Assets Liabilities Accounts payable 25,000Cash 8, 000 Bank overdrafts 1,500Accounts receivables 10, 000 Long term loans 40,000Inventory 10, 000 Total liabilities 66,500Property, Plant and Equipment 100, 000 Shareholders Equity Share capital 35,000 Retained earnings 26, 500Total Assets 128, 000 Total Liabilities and SE 128, 000 You have the following information from the balance sheet of Company X as at 30 June 2018.Calculate liquid ratio. Question 4Select one:a.0.72b.1.12c.0.8d.1.06
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.