Question 11 Chapter 4 of +2-B - USHA Publication 12 Class

Question 11 Chapter 4 of +2-B

I. Liquidity Ratios

11. (Short Term Financial Position) Following is the balance sheet of Crescent Chemical Works Limited as of 31st March 2018

Balance Sheet
Particular	Note No.	₹
I. Equity and Liabilities
Shareholders’ Funds
6% Preference Share Capital: Issued and Paid-up		15,000
Equity Share Capital: Issued and Paid-up		55,000
Reserves and Surplus
General Reserve		25,000
Reserves for Contingencies		10,000
Non-Current Liabilities
Long-term Borrowing :
6% Mortgage Debentures		25,000
Current Liabilities
Trade Payable		11,000
Other Current Liabilities :
Outstanding Expenses		2,000
Output IGST		2,000
Output CGST		2,500
Output SGST		2,500
		1,50,000
II. Assets :
Non-Current Assets
Tangible Assets
Land and Building		20,000
Plant and Machinery		22,000
Furniture and Fixtures		3,000
Current Assets
Trade Investment		5,000
Inventory		50,000
Trade Receivable		30,000
Prepaid Expenses		2,000
Cash at Bank		18,000
		1,50,000

The solution of Question 11 Chapter 4 of +2-B: –

Current Assets	=	Inventories + Trade receivables + Trade Investments + Prepaid expenses + Cash
	=	₹ 50,000 + ₹ 30,000 + ₹ 5,000 + ₹ 2,000 + ₹18,000
Current Assets	=	₹ 1,05,000

Current Liabilities	=	Trade payable + Outstanding Expenses + Output IGST + Output CGST + Output SGST
	=	₹ 11,000 + ₹ 2,000 + ₹ 2,000 + ₹ 2,500 + ₹ 2,500
Current Liabilities	=	₹ 20,000

Current Ratio=	Current Assets
	Current Liabilities

Current Ratio	=	₹ 1,05,000
Current Ratio	=	₹ 20,000

	=	5.25 : 1

Quick Assets	=	Trade receivables + Trade Investments + Cash
	=	₹ 30,000 + ₹ 5,000 + ₹ 18,000
Quick Assets	=	₹ 53,000
Current Liabilities	=	₹ 20,000

Quick Ratio	=	Quick Assets
Quick Ratio	=	Current Liabilities

	=	₹ 53,000
	=	₹ 20,000

Quick Ratio	=	2.65 : 1

What are Liquidity Ratios – Formulas and Examples

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