Question : A company quick ratio is 1.5 :1 Current liabilities are Rs.2,00,000 and inventory is Rs.1,80,000. Current ratio will be -
Option 1: 0.90 : 1
Option 2: 1.90 : 1
Option 3: 1.40 : 1
Option 4: 2.40 : 1
Correct Answer: 2.40 : 1
Solution : If Rs.180000 is Inventory it will increase current assets. Hence new ratio will be -
Current Ratio = Current Assets / Current Liabilities
= 300000 (Working Note) + 180000
_____________________________
200000
= 480000 / 200000
= 2.40 : 1
Working Note For Current Assets -
Current Ratio = Current assets / Current liabilities
Current assets / Current liabilities = Current ratio
X / 200000 = 1.5 / 1
Current assets = 200000 * 1.5 = Rs.300000
Hence the correct answer is option 1.