Page No 4.103:
Question
26:
Current Assets of a company is are ` 5,00,000. Its Current Ratio is 2.5 : 1 and Quick Ratio is 1 : 1. Calculate value of Current Liabilities, Liquid Assets and Inventory.
Answer:
Current ratio= Current assets/Current liabilities=2.5/1
Quick ratio= Liquid assets/Current liabilities=1/1
Current Assets = 5,00,000
Current ratio= Current assets/Current liabilities=5,00,000/2.5=2,00,000
Liquid Assets = Current Liabilities × 1 = 2,00,000
Inventory = Current Assets − Quick Assets
= 5,00,000 − 2,00,000 = 3,00,000
Page No 4.103:
Question
27:
Working Capital ` 3,60,000; Total :Debts ` 7,80,000; Long-term Debts ` 6,00,000; Inventories ` 1,80,000. Calculate Liquid Ratio.
Answer:
Current Liabilities = Total Debts − Long-term Debts
= 7,80,000 − 6,00,000 = 1,80,000
Current Assets = Current Liabilities + Working Capital
= 1,80,000 + 3,60,000 = 5,40,000
Quick Assets = Current Assets − Stock
= 5,40,000 − 1,80,000 = 3,60,000
Current ratio= Quick assets/Current liabilities=3,60,000/1,80,000=2:1
Page No 4.103:
Question
28:
Quick Ratio of a company is 2:1. State giving reasons,
which of the following transactions would (i)
improve, (ii) reduce, (iii) Not change the Quick Ratio:
(a) Purchase of goods for cash; (b) Purchase of goods on credit; (c) Sale of
goods (costing
`20,000) for `20,000; (d) Sale
of goods (costing
`20,000) for `22,000; (e) Cash
received from Trade Receivables.
Answer:
Quick Ratio = 2:1
Let Quick Assets be = ` 40,000
Current Liabilities = ` 20,000
(a) Purchase of goods for Cash- Reduce
Reason: This transaction will result decrease in cash and increases in stock. Liquid Asset will decrease due payment for goods purchased.
Example: Purchase of goods ` 10,000 for cash
Quick Assets = 40,000 − 10,000 (Cash) = ` 30,000
Quick ratio (After purchase of Assets)=
(40,000-10,000)/20,000=1.5:1
(b) Purchase of goods on Credit- Reduce
Reason: Purchase of goods on credit will result increase in Current Liabilities and no change in Quick Assets.
Example: if Purchase of goods on Credit `10,000
Current Liabilities = 20,000 + 10,000 (Creditors) = `30,000
Quick ratio (After purchase of goods on credit)=
40,000/(20,000+10,000)=1.33:1
(c) Sale of goods for ` 20,000- Improve
Reason: Sale of goods will result in increase in Quick Assets by the amount of ` 40,000 in the form of either in cash or debtor. This transaction will result no change in current liabilities.
Quick ratio (After sale of goods)= (40,000+20,000)/20,000=3:1
(d) Sale of goods costing ` 20,000 of or ` 22,000- Improve
Reason: This transaction will increase the Quick Assets by ` 22,000 in the form of either in cash or debtors but no effect on the Current Liabilities.
Quick Assets after sale of goods = 40,000 + 22,000 = ` 62,000
Quick Ratio after sale of goods= (40,000+22,000)/20,000=3.1:1
(e) Cash received from debtors- No change
Reason: This transaction results increase in one quick asset in the form of cash and decrease in other quick asset in the form of debtor with equal amount. Therefore it result in no change in the total of Quick Assets.
Example: Cash received from debtors `10,000
Quick Assets = 40,000 + 10,000 (Cash) − 10,000 (Debtors) = 40,000
Quick ratio (After cash received from debtors)
= (40,000-10,000+10,000)/20,000=2:1
Page No 4.104:
Question 29: Quick Ratio of Z Ltd. is 1:1. State, with reason,
which of the following transactions would (i)
Increase (ii) Decrease or (ii) Not change the ratio.
(a) Included in the trade payables was bill payable of 3,000 which was met on maturity;
(b) Debentures of 50,000 were converted into equity shares.
(CBSE 2014)
Answer:
|
Transaction |
Impact |
|
Paid
a bills payable ` 5,000 on maturity |
As
cash is going out, quick assets are decreasing by 3,000 and same amount is decreasing
from current liabilities. So, quick ratio will not change. |
|
Converted
Debentures into Equity shares |
As
Debenture and Equity shares are not the part of Quick assets and Current
liabilities. So, quick ratio will not change. |
Page No 4.104:
Question 30:
The Quick Ratio of a company is 0.8:1. State with reason, whether
the following transactions will increase, decrease or not change the Quick
Ratio:
(i) Purchase of loose tools for `2,000;
(ii) Insurance premium paid in advance `500; (iii) Sale of
goods on credit
`3,000; (iv) Honoured a bills
payable of `5,000 on maturity.
Answer:
|
Transaction |
Impact |
|
Purchase
of loose tools ` 2,000 |
As
cash is going out, quick assets are decreasing by 2,000. So, quick ratio will
decrease. |
|
Insurance
premium paid in advance ` 500 |
As
cash is going out, quick assets are decreasing by 500. So, quick ratio will
decrease. |
|
Sale
of goods on credit ` 3,000 |
As
debtors increase, quick assets also increase by 3,000. So, quick ratio will
increase. |
|
Honoured a bills payable ` 5,000 on maturity |
As
cash is going out, quick assets are decreasing by 5,000 and since bill is honoured current liabilities are decreasing. Thus, quick
ratio will decrease. |
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