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    Question

    A manufacturing company reports current assets of

    ₹8,50,000 and current liabilities of ₹3,40,000 as of 31 March 2025. The assets include ₹1,00,000 worth of prepaid expenses and ₹1,50,000 of inventory. The management wants to evaluate short-term liquidity both with and without inventory. Based on this information, calculate the company’s current ratio and quick ratio.
    A Current Ratio: 2.5; Quick Ratio: 2.0 Correct Answer Incorrect Answer
    B Current Ratio: 2.5; Quick Ratio: 1.0 Correct Answer Incorrect Answer
    C Current Ratio: 2.5; Quick Ratio: 1.7 Correct Answer Incorrect Answer
    D Current Ratio: 2.0; Quick Ratio: 1.0 Correct Answer Incorrect Answer
    E Current Ratio: 3.0; Quick Ratio: 1.5 Correct Answer Incorrect Answer

    Solution

    • Current ratio = Current assets ÷ Current liabilities = ₹8,50,000 ÷ ₹3,40,000 = 2.5. • Quick assets = CA – Inventory – Prepaid = 8,50,000 – 1,50,000 – 1,00,000 = ₹6,00,000. • Quick ratio = 6,00,000 ÷ 3,40,000 ≈ 1.76.

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