Question

X Ltd. has a current ratio of 3:1 and quick ratio of 2:1. If excess of current assets over quick assets, represented by inventories is Rs. 5,000, calculate current assets and quick assets.

• A. Rs. 15,000 ; Rs. 10,000
• B. Rs. 15,000 ; Rs. 14,000
• C. Rs. 10,000 ; Rs. 15,000
• D. Rs. 15,000 ; Rs. 18,000

Hint:

When solving ratio-based financial problems, assume current liabilities = \( x \). This simplifies finding current and quick assets easily.

Answer 1

The Correct Option is A

Step 1: Recall formulas.
\[\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}, \text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}\] Also, \[\text{Inventories} = \text{Current Assets} - \text{Quick Assets}\]

Step 2: Assume Current Liabilities (CL).
Let current liabilities = \( x \).

Step 3: Express Current Assets (CA) and Quick Assets (QA).
Current Ratio = 3:1 → \( \text{CA} = 3x \)
Quick Ratio = 2:1 → \( \text{QA} = 2x \)

Step 4: Use inventory condition.
Inventories = CA – QA = ₹ 5,000
So, \( 3x - 2x = x = 5,000 \)

Step 5: Find CA and QA.
CA = 3x = \( 3 \times 5,000 = 15,000 \)
QA = 2x = \( 2 \times 5,000 = 10,000 \)

Final Answer: \[\boxed{\text{Current Assets = Rs. 15,000 ; Quick Assets = Rs. 10,000}}\]