Question
Current ratio is 4:1. Net Working Capital is Rs.30,000.
Find the amount of current Assets.Solution
The current ratio is 4:1, which means that for every Rs.4 of current assets, there is Rs.1 of current liabilities. Let's assume that the amount of current liabilities is x. Then, we can write: Current assets / Current liabilities = 4/1 Current assets = 4x We also know that the net working capital is Rs.30,000. This means that: Current assets - Current liabilities = Rs.30,000 Substituting the value of current assets from the first equation, we get: 4x - x = Rs.30,000 3x = Rs.30,000 x = Rs.10,000 So, the amount of current assets is: Current assets = 4x = 4 * Rs.10,000 = Rs.40,000
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