(a)

(a)OR(b)

Y Ltd. has a Current Ratio of $\displaystyle 3$ $\displaystyle 5$ : $\displaystyle 1$ and Quick Ratio of $\displaystyle 2$ : 1. If excess of current assets over quick assets represented by inventory is ₹ $\displaystyle 48,000$, calculate current assets and current liabilities. (b) Calculate Debt to Equity Ratio : Shareholder Funds ₹ $\displaystyle 2,00,000$ Reserves and Surplus ₹ $\displaystyle 1,00,000$ Total Debt ₹ $\displaystyle 4,00,000$ Current Liabilities ₹ $\displaystyle 1,00,000$

Current Ratio= Current Assets/ Current Liabilities Current Ratio= $\displaystyle 3.5$:$\displaystyle 1$ Current Assets/ Current Liabilities= $\displaystyle 3.5$:$\displaystyle 1$ Current Assets(CA)= $\displaystyle 3.5$ Current Liabilities(CL).............................. ½ Quick Ratio= Quick Assets/ Current Liabilities Quick Ratio = $\displaystyle 2$:$\displaystyle 1$ Quick Assets/ Current Liabilities= $\displaystyle 2$:$\displaystyle 1$ Quick Assets(QA) = $\displaystyle 2$ Current Liabilities(CL).................................. ½ Inventory= CA- QA $\displaystyle 48,000$= $\displaystyle 3.5$ CL- $\displaystyle 2$ CL $\displaystyle 48,000$= $\displaystyle 1.5$ CL Current Liabilities (CL)= ₹$\displaystyle 32000$ ....................................................... ½ Current Assets(CA)= 3.5x $\displaystyle 32000$= ₹$\displaystyle 1,12,000$ .....................................½ Q. (i)(b)Calculate Debt to Equity Ratio.............................................. Ans. Debt Equity Ratio= Debt/ Equity................................................................. ½ Debt= Total Debt- Current Liabilities= $\displaystyle 4,00,000$-$\displaystyle 1,00,000$= $\displaystyle 3,00,000$ ....... ½ Equity= Shareholder’s funds= $\displaystyle 2,00,000$ .....................................................½ Debt Equity Ratio= $\displaystyle 3,00,000$/ $\displaystyle 2,00,000$= $\displaystyle 1.5$:1............................................½ Page $\displaystyle 20$ Q. (ii)The Current ratio of a company........................................................ Ans. S. No. Effect on Ratio Reason a No change No change in both current assets and current liabilities. b Decline Current assets decrease with no change in current liabilities. c Improve Current assets increase with no change in current liabilities d Improve Current assets increase with no change in current liabilities