CA Intermediate · Financial Management and Strategic Management · Financial Analysis and Planning - Ratio Analysis
Sharma Traders has current liabilities of Rs 4,00,000. Its current ratio is 2.5 and its quick ratio is 1.5. Its stock is valued at Rs ____ (assume no prepaid expenses or other non-quick current assets). Select the correct value.
Stock is Rs 4,00,000. Current assets are 2.5 times Rs 4,00,000, which is Rs 10,00,000, and quick assets are 1.5 times, which is Rs 6,00,000. Since stock is the only difference between current and quick assets here, stock equals Rs 10,00,000 minus Rs 6,00,000.
- ARs 2,00,000
- BRs 4,00,000Correct
- CRs 6,00,000
- DRs 10,00,000
Explanation
Current assets = 2.5 x 4,00,000 = Rs 10,00,000. Quick assets = 1.5 x 4,00,000 = Rs 6,00,000. Stock = 10,00,000 - 6,00,000 = Rs 4,00,000. Check: 6,00,000 + 4,00,000 = 10,00,000, giving 2.5. Rs 6,00,000 is wrong as it is the quick assets figure.
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