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)?ĀSolution
Net Working Capital = Current Assets- Current LiabilitiesĀ 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 liabilitiesĀ Therefore,Ā 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 Ā Net Working Capital = Current Assets- Current Liabilities = 30-20 = Rs.10 lakh
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