Page 236 - AAAXII

Model Test Papers M.225

22. Current Ratio = 2.5 : 1

It means if Current Assets are 2.5, Current Liabilities are 1.
Hence, Working Capital = 2.5 – 1 = 1.5
If Working Capital is 1.5, Current Assets are = 2.5

2.5
If Working Capital is 1, Current Assets are =
1.5
2.5
If Working Capital is ` 1,20,000, Current Assets are = × ` 1,20,000 = ` 2,00,000.
1.5

Current Liabilities = ` 2,00,000 – ` 1,20,000 (Working Capital)
= ` 80,000
Quick Assets
Quick Ratio =
Current Liabilities

1.5 Quick Assets
=
1 ` 80,000

Quick Assets = 1.5 × ` 80,000 = ` 1,20,000
Closing Inventory = Current Assets – Quick Assets
= ` 2,00,000 – ` 1,20,000 = ` 80,000.
Cost of Revenue from Operations
Inventory Turnover Ratio =
Average Inventory

` 3,00,000
3 =
Average Inventory
Average Inventory = ` 1,00,000
Let Opening Inventory = x

x + ` 80,000
So, Average Inventory = = ` 1,00,000
2
x + ` 80,000 = ` 2,00,000
x = ` 1,20,000 (Opening Inventory).
Or
Debt ` 10,00,000
(i) Debt to Equity Ratio = = = 0.5 : 1.
Equity ` 20,00,000
Notes:
1. Debt = 6% Debentures + 9% Bank Loan
= ` 3,00,000 + ` 7,00,000 = ` 10,00,000.
2. Equity = Paid-up share capital + Debentures Redemption Reserve
= ` 17,00,000 + ` 3,00,000 = ` 20,00,000.