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

Q-12- CH-4 Book 2 - Usha Pub. +2 Book 2020 - Solution

Question 12 Chapter 4 of +2-B

I. Liquidity Ratios

12. (Current Ratio & Quick Ratio & Conclusion) Following is the balance sheet of XYZ Ltd. As of 31st March 2018.

 Balance Sheet Particular Note No. ₹ I. Equity and Liabilities Shareholders’ Funds Equity Share Capital 24,000 2,400 shares of ₹10 each fully paid up Reserves and Surplus Statement of Profit and Loss 6,000 Non-Current Liabilities Long-term Borrowing : 10% Debentures 15,000 Current Liabilities Trade Payable 23,400 Provisions Provision for Taxation 600 69,000 II. Assets : Non-Current Assets Tangible Assets Machinery and Equipment 45,000 Current Assets Inventory 12,000 Trade Receivable 9,000 Prepaid Expenses 720 Cash at Bank 2,280 69,000

## The solution of Question 12 Chapter 4 of +2-B: –

 Current Assets = Inventory + Trade Receivable + Prepaid Expenses + Cash at Bank = ₹ 12,000 + ₹ 9,000 + ₹ 2,280 + ₹ 720 Current Assets = ₹ 24,000

 Current Liabilities = Trade payable Provision for taxation = ₹ 23,400 + ₹ 600 Current Liabilities = ₹ 24,000

 Current Ratio= Current Assets Current Liabilities

 Current Ratio = ₹ 24,000 ₹ 24,000 = 1: 1

 Quick Assets = Trade receivables + Cash = ₹ 9,000 + ₹ 2,280 Quick Assets = ₹ 11,280 Current Liabilities = ₹ 24,000
 Quick Ratio = Quick Assets Current Liabilities = ₹ 11,280 ₹ 24,000 Quick Ratio = 0.47 : 1

Conclusion:-
Current Ratio (1:1)
The situation is not good because the current assets are equal or sufficient to pay current liabilities.
Liquid Ratio
This is also no so good because there is not margin in liquid assets for the current liabilities of the business.

What are Liquidity Ratios – Formulas and Examples

Comment if you have any question.

Also, Check out the solved question of previous Chapters: –