Question

    Current ratio of a firm is 1.5 and quick ration is 1.2. If there are total inventories of Rs.6 lakh, what is the net working capital of the firm (in Rs. Lakh)? 

    A 6 Correct Answer Incorrect Answer
    B 10 Correct Answer Incorrect Answer
    C 12 Correct Answer Incorrect Answer
    D 15 Correct Answer Incorrect Answer
    E Cannot be determined Correct Answer Incorrect Answer

    Solution

    Net Working Capital = Current Assets- Current Liabilities  Quick Ratio= (Current Assets- Inventories) / Current Liabilities =1.2 From this - Current Assets = 1.2 x Current Liabilities + 6 Current Ratio= Current Assets/ Current Liabilities =1.5 From this - Current Assets = 1.5 x Current liabilities  Therefore,  1.5 x Current liabilities = 1.2 x Current Liabilities + 5 0.3 Current Liabilities = 6 Current Liabilities = Rs.20 Lakh Current Assets = 1.5 x 20 = Rs. 30 lakh   Net Working Capital = Current Assets- Current Liabilities = 30-20 = Rs.10 lakh

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