Question

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

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

Hint:

To find inventory, subtract quick assets from current assets. Quick assets are calculated using the quick ratio formula: \({Quick Ratio} = {Quick Assets} \div {Current Liabilities}\).

Answer 1

The Correct Option is A

Quick Assets = Current Assets - Inventory: \[ {Quick Assets} = rupee 60,000 - {Inventory} \] Quick Ratio = Quick Assets / Current Liabilities: Using the given quick ratio of 2.5 : 1: \[ {Quick Assets} = 2.5 \times {Current Liabilities} \] Current Liabilities: From the current ratio of 4 : 1: \[ {Current Liabilities} = \frac{{Current Assets}}{4} = \frac{rupee 60,000}{4} = rupee 15,000 \] Quick Assets: \[ {Quick Assets} = 2.5 \times rupee 15,000 = rupee 37,500 \] Inventory: \[ {Inventory} = {Current Assets} - {Quick Assets} = rupee 60,000 - rupee 37,500 = rupee 22,500 \]