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CA Intermediate · Financial Management and Strategic Management · Financial Analysis and Planning - Ratio Analysis

Meera Textiles Ltd. has a current ratio of 2.5:1 and working capital of ₹90,000. What is the amount of its current liabilities?

Current liabilities are ₹60,000. With a current ratio of 2.5, current assets are 2.5 times current liabilities, so working capital equals 1.5 times current liabilities. Dividing ₹90,000 by 1.5 gives ₹60,000, and current assets of ₹1,50,000 confirm the ratio.

  1. A₹36,000
  2. B₹60,000Correct
  3. C₹1,50,000
  4. D₹2,25,000

Explanation

Current assets = 2.5 × CL. Working capital = CA − CL = 1.5 × CL = 90,000, so CL = ₹60,000. Check: CA = 1,50,000, and 1,50,000/60,000 = 2.5. Choosing ₹36,000 results from dividing 90,000 by 2.5, which wrongly treats working capital as current assets.

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