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
Question
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
Solution
The current ratio is calculated as Current Assets / Current Liabilities.
Given that the current ratio is 2.5:1 and the current liabilities are ₹ 4,00,000, we can set up the equation as follows:
2.5 = Current Assets / ₹ 4,00,000
To find the current assets, we multiply both sides by ₹ 4,00,000:
Current Assets = 2.5 * ₹ 4,00,000 = ₹ 10,00,000
Working capital is calculated as Current Assets - Current Liabilities.
So, the working capital will be:
Working Capital = ₹ 10,00,000 - ₹ 4,00,000 = ₹ 6,00,000
So, the answer is (a) ₹ 6,00,000.
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