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)?
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
