# 12th | Volume 3 | Chapter:4 | Question No. 31 to 35 | Accounting Ratio | Ts grewal Accounts Solution 2022-2023

#### Question 31:

Total Assets  `11,00,000; Fixed Assets  `5,00,000; Capital Employed  `10,00,000. There were no Long-term Investments.
Calculate Current Ratio.

Current Assets = Total Assets − Fixed Assets

Fixed Assets = 5,00,000

Total Assets = 11,00,000

Current Assets = 11,00,000 − 5,00,000 = 6,00,000

Current Liabilities = Total Assets − Capital Employed

= 11,00,000 − 10,00,000 = 1,00,000

Current ratio= Current Assets/ Current liabilities=6,00,000/1,00,000=6:1

#### Question 32:

Capital Employed  `20,00,000; Fixed Assets  `14,00,000; Current Liabilities  `2,00,000. There are no Long-term Investments. Calculate Current Ratio.

Capital Employed = 20,00,000

Fixed Assets = 14,00,000

Current Assets = Capital Employed + Current Liabilities − Fixed Assets

= 20,00,000 + 2,00,000 − 14,00,000 = 8,00,000

Current ratio= Current Assets/ Current liabilities=8,00,000/2,00,000=4:1

#### Question 33:

From the following calculate: (i) Current Ratio; and (ii) Quick Ratio:

 ` ` Total Debt 12,00,000 Long-term Borrowings 4,00,000 Total Assets 16,00,000 Long-term Provisions 4,00,000 Fixed Assets (Tangible) 6,00,000 Inventories 1,90,000 Non-current Investment 1,00,000 Prepaid Expenses 10,000 Long-term Loans and Advances 1,00,000

(i)                 Current ratio

Current RatioCurrent Assets=Total Assets-Fixed Assets-Non-Current Investment - Long term Loans and Advances

=16,00,000-6,00,000-1,00,000-1,00,000= ` 8,00,000

Current Liabilities=Total Debt - Non-Current Liabilities

=12,00,000-4,00,000-4,00,000= ` 4,00,000

Current Ratio=Current AssetsCurrent Liabilities

=8,00,000/4,00,000=2:1

(ii)              ​ Quick Ratio

Quick Assets=Current Assets-Stock-Prepaid Expenses

=8,00,000-1,90,000−10,000= ` 6,00,000

Quick Ratio=Quick Assets/Current Liabilities

=6,00,000/4,00,000=1.5:1

#### Question 34:

Following is the Balance Sheet of Crescent Chemical Works Limited as at 31st March, 2021:

 Particulars Note No. ` I. EQUITY AND LIABILITIES : 1. Shareholder's Funds : (a) Share Capital 70,000 (b) Reserves and Surplus 35,000 2. Non-Current Liabilities : Long-term Borrowings 25,000 3. Current Liabilities : (a) Short-term Borrowings 3,000 (b) Trade Payables (Creditors) 13,000 (b) Short-term Provisions: Provision for Tax 4,000 Total 1,50,000 II. ASSETS : 1. Non-Current Assets (a) Fixed Assets (Tangible) 45,000 (b) Non-current Investments 5,000 2. Current Assets (a) Inventories (Stock) 50,000 (b) Trade Receivables (Debtors) 30,000 (c) Cash and Cash Equivalents 20,000 Total 1,50,000

Compute Current Ratio and Liquid Ratio

Current Assets = Inventory + Trade Receivables + Cash and Cash Equivalents

= 50,000 + 30,000 + 20,000 = 1,00,000

Current Liabilities = Short-term Borrowings + Trade Payables + Provision for Tax

= 3,000 + 13,000 + 4,000 = 20,000

Quick Assets = Trade Receivables + Cash and Cash Equivalents

= 30,000 + 20,000 = 50,000

Current ratio= Current Assets/ Current liabilities=1,00,000/20,000=5:1

Quick ratio= Liquid Assets/ Current liabilities=50,000/20,000=2.5:1

1. Ideal Current Ratio for a business is considered to be 2:1. But in this case the ratio is quite high i.e. 5:1. This may be due to the following reasons:

(i) Blockage of Funds in Stock

(ii) High Amount outstanding from Debtors

(iii)            Huge Cash and Bank Balances

2. Ideal Quick Ratio of a business is supposed to be 1:1. This implies that Liquid Assets should be equal to the Current Liabilities. But in the given case Quick Ratio is 2.5 : 1 which indicates that the Liquid Assets are quite high in comparison to the Current Liabilities.

#### Question 35:

Total Assets  ` 2,60,000; Total Debts  ` 1,80,000; Current Liabilities  ` 20,000. Calculate Debt to Equity Ratio.

Total Debts = 1,80,000

Current Liabilities = 20,000

Long-term Debts = Total Debts − Current Liabilities

= 1,80,000 − 20,000 = 1,60,000

Equity = Total Assets − Total Liabilities

= 2,60,000 − 1,80,000 = 80,000

Debt equity ratio= Long-term Debt /equity=1,60,000/80,000=2:1