CA Intermediate · Financial Management and Strategic Management · Financial Analysis and Planning - Ratio Analysis
Meera Textiles has a current ratio of 2.5:1 and a quick ratio of 1.5:1. Its current liabilities are ₹4,00,000. There are no prepaid expenses. What is the value of its inventory?
Inventory is ₹4,00,000. Current assets are 2.5 times ₹4,00,000, which is ₹10,00,000, and quick assets are 1.5 times, which is ₹6,00,000. With no prepaid expenses, inventory equals the difference between the two, ₹4,00,000.
- A₹2,00,000
- B₹6,00,000
- C₹4,00,000Correct
- D₹10,00,000
Explanation
Current assets = 2.5 × 4,00,000 = ₹10,00,000. Quick assets = 1.5 × 4,00,000 = ₹6,00,000. Inventory = 10,00,000 − 6,00,000 = ₹4,00,000. Check: 1.0 × 4,00,000 equals the gap between the two ratios. ₹6,00,000 is wrong because it is the quick assets figure.
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