Cash Balance Rs 5,000, Trade payables Rs 40,000, Inventory Rs 50,000, Trade Receivables Rs 65,000 and - Accountancy - Reconstitution- Change in Existing Profit Sharing Ratio

Question

Cash Balance Rs 5,000, Trade payables Rs 40,000, Inventory Rs
50,000, Trade Receivables Rs 65,000 and Prepaid Expenses are Rs
10,000 Liquid Ratio will be

Sumi Jain · Accepted Answer

Dear Student,

Liquid Ratio = Liquid Assets/ Current Liability
Liquid Assets = Cash + Trade Receivables = 5000+65000 = Rs
70000
Note: Inventory and Prepaid Expenses are not considered as a part
of Liquid Assets

Liquid Ratio = 70000/40000 = 1 75:1

Regards,

Cash Balance Rs. 5,000, Trade payables Rs. 40,000, Inventory Rs. 50,000, Trade Receivables Rs. 65,000 and Prepaid Expenses are Rs. 10,000. Liquid Ratio will be