If the Current Ratio is 3.5:1 and the Quick Ratio is 2:1. If the excess of current assets over quick assets (represented by inventories) is ₹24,000, calculate the current assets.

Correct option is D

We are given:

• Current Ratio = 3.5:1, which means:

  

  So, Current Assets = 3.5 × Current Liabilities
• Quick Ratio = 2:1, which means:

So, Quick Assets = 2 × Current Liabilities

• The difference between Current Assets and Quick Assets is ₹24,000:
  

Step 1: Express Current and Quick Assets in Terms of Liabilities

Let Current Liabilities be X.

• Current Assets = 3.5X

• Quick Assets = 2X

• Inventories = Current Assets - Quick Assets

  3.5X - 2X = 24,000

  1.5X - 24,000

• Step 2: Solve for Current Liabilities (X)
      
  

  

• Step 3: Calculate Current Assets
  

Information Booster:

The Current Ratio and Quick Ratio are key liquidity ratios used to measure a company's ability to pay its short-term liabilities.

• Current Ratio includes all current assets, including inventory, receivables, and cash.

• Quick Ratio (Acid-Test Ratio) excludes inventory and considers only the most liquid assets (cash, accounts receivable, and marketable securities).

• A higher Current Ratio and Quick Ratio indicate a strong liquidity position, but excess inventory can sometimes indicate inefficiency.

These ratios help investors and creditors assess a company's financial health and ability to meet short-term obligations.