Question

When Current Ratio is 4 : 1, Current Assets are Rs.60,000 and Quick Ratio is 2.5 : 1, the amount of ‘Inventory’ will be:

• A. Rs.22,500
• B. Rs.37,500
• C. Rs.15,000
• D. Rs.25,000

Hint:

Inventory is calculated by subtracting Quick Assets from Current Assets. Use both ratios effectively for such computations.

Answer 1

The Correct Option is A

The formula for Quick Ratio: \[ {Quick Ratio} = \frac{ {Quick Assets}}{ {Current Liabilities}} \] Using the Quick Ratio of 2.5 : 1 and Current Assets of Rs.60,000: \[ {Quick Assets} = Rs.60,000 - {Inventory} \] \[ \frac{ {Quick Assets}}{ {Current Liabilities}} = 2.5 : 1 \implies \frac{Rs.60,000 - {Inventory}}{ {Current Liabilities}} = 2.5 \] Using the Current Ratio: \[ {Current Liabilities = } \frac{Rs.60,000}{4} = Rs.15,000 \] Quick Assets: \[ Rs.15,000 \times 2.5 = Rs.37,500 \] Inventory: \[ Rs.60,000 - Rs.37,500 = Rs.22,500 \]