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Accounting Ratios 3.51
Notes to Accounts
Particulars 31st March, 31st March,
2024 (`) 2023 (`)
1. Other Current Liabilities
Expenses Payable 1,50,000 1,25,000
Current Maturities of Long-term Debt 50,000 50,000
2,00,000 1,75,000
2. Inventories
Raw Materials 3,00,000 2,00,000
WIP 1,00,000 50,000
Loose Tools 1,00,000 ...
5,00,000 2,50,000
3. Other Current Assets
Prepaid Expenses 25,000 50,000
Other Advances 75,000 50,000
1,00,000 1,00,000
[Ans.: Current Ratio: 2024—1.87 : 1; 2023—2.3 : 1; Liquid Ratio: 2024—1.3 : 1; 2023—1.7 : 1.]
1
22. Current Ratio 4.5, Quick Ratio 3 : 1, Inventory ` 72,000. Cash ` 4,000, Gross Profit @ 33 % on cost
3
1
was ` 1,00,000, Cash Revenue from Operations being 33 % of Credit Revenue from Operations; Trade
3
Receivables Turnover Ratio is 3 Times. In current assets, there was no asset other than Inventory, Trade Receivables
and Cash. Calculate the Opening Trade Receivables. [Ans.: Opening Trade Receivables = ` 60,000.]
[Hint: Current Assets = ` 2,16,000; Quick Assets = ` 1,44,000; Closing Trade Receivables = Quick Assets
– Cash = ` 1,40,000. Credit Revenue from Operations = ` 3,00,000.]
Calculation of Current Assets and Quick Assets:
Quick Assets (QA) Current Assets – Inventory
Quick Ratio =
Current Liabilities (CL) CL
`
CA – 72,000
3 =
CL
CA – ` 72,000 = 3CL
CA – 3CL = ` 72,000 ...(1)
CA – 4.5CL = 0 [As per Current Ratio] ...(2)
Substracting Equation (2) from (1), we get
` 72,000
1.5CL = ` 72,000 or CL = = ` 48,000.
1.5
Current Assets = Current Liabilities (CL) × Current Ratio
= ` 48,000 × 4.5 = ` 2,16,000.
Quick Assets = ` 48,000 (CL) × 3 = ` 1,44,000.
23. The Current Ratio of a company is 3 : 1. State giving reason, which of the following would improve,
reduce or not change the ratio:
(i) Repayment of a Current Liability;
(ii) Purchase of goods on cash;
(iii) Sale of office equipment for ` 4,000 (Book value ` 5,000);
(iv) Sale of goods for ` 11,000 (cost ` 10,000);
(v) Payment of dividend. (Delhi 1999)
[Ans.: (i) Improve; (ii) No change; (iii) Improve; (iv) Improve; (v) Improve.]