If current ratio is 2.2 : 1, liquidity ratio is 1.5 : 1 and the net working capital is Rs. 36,000, then amount of Current Assets is

The correct answer is - Rs. 66,000

Key Points

• Current Ratio
  • The current ratio is given as 2.2 : 1. This means that Current Assets are 2.2 times the Current Liabilities.
• Liquidity Ratio
  • The liquidity ratio (or quick ratio) is 1.5 : 1, indicating that Liquid Assets are 1.5 times the Current Liabilities.
• Net Working Capital
  • Net Working Capital is given as Rs. 36,000.
• Calculation
  • Net Working Capital (NWC) = Current Assets - Current Liabilities
  • Given NWC = Rs. 36,000, let Current Liabilities be denoted by 'x'.
  • From the Current Ratio: Current Assets = 2.2 * x
  • So, 2.2 * x - x = Rs. 36,000
  • 1.2 * x = Rs. 36,000
  • x = Rs. 36,000 / 1.2 = Rs. 30,000 (Current Liabilities)
  • Current Assets = 2.2 * x = 2.2 * 30,000 = Rs. 66,000

Additional Information

• Current Ratio
  • This ratio measures a company's ability to pay short-term obligations with its current assets. A ratio above 1 indicates that the company has more current assets than current liabilities.
  • A current ratio of 2.2 means that for every rupee of current liabilities, the company has Rs. 2.2 of current assets.
• Liquidity Ratio (Quick Ratio)
  • The quick ratio is a measure of a company's immediate short-term liquidity, calculated as (Current Assets - Inventory) / Current Liabilities.
  • A quick ratio of 1.5 means the company can meet its short-term obligations without selling inventory.
• Net Working Capital
  • Net Working Capital (NWC) is a measure of a company's liquidity, operational efficiency, and short-term financial health. It is calculated as Current Assets minus Current Liabilities.
  • Positive NWC indicates that a company can fund its current operations and invest in future activities and growth.