question_answer

Calculate the following ratios:

(i) Liquid ratio

(ii) Proprietary ratio

Information Revenue from operations i.e., sales Rs. 5,00,000; cost of revenue from operations i.e., cost of goods sold Rs. 2,40,000; selling expenses Rs. 80,000; office expenses Rs. 40,000; total current assets Rs. 2,00,000; current liabilities Rs. 1,00,000; closing inventory Rs. 20,000; fixed assets Rs. 8,00,000; equity share capital Rs. 3,00,000 and general reserve Rs. 2,00,000.

Answer:

(i) Liquid Ratio \[=\frac{\text{Liquid}\,\text{Assets}}{\text{Current}\,\text{Liabilities}}=\frac{1,80,000}{1,00,000}=\,\,9\,:\,5\,\,or\,\,1.8\,:\,1\] Liquid Assets = Current Assets - Inventory = 2,00,000 - 20,000 = Rs. 1,80,000 (ii) Proprietary Ratio \[=\frac{Shareholders'\,Funds}{Total\,Assets}=\frac{5,00,000}{10,00,000}=\,\,1\,\,:\,2\] Equity Share Capital                   = 3,00,000 (+) Reserves and Surplus = 2,00,000 Shareholders' Funds                     = Rs. 5,00,000 Total Assets = Fixed Assets + Current Assets + Investments = 8,00,000 + 2,00,000 + 0 = Rs. 10,00,000