Calculate Investment Amounts for Fixed Annual Income

Rs. 25,00,000

Rs. 50,00,000

8% and 5%

<p>The current ratio is calculated by dividing current assets by current liabilities. Current assets include cash, bank, debtors, and inventory, which total to 1,100,000. Current liabilities include trade payables and bank OD, which total to 200,000. Therefore, the current ratio is $rac{1,100,000}{200,000} = 5.5$.</p> Signup and view all the answers

<p>The Acid Test Ratio, also known as the quick ratio, is calculated by dividing quick assets by current liabilities. Quick assets include cash, bank, and debtors, which total to 700,000. Current liabilities include trade payables and bank OD, which total to 200,000. Therefore, the Acid Test Ratio is $rac{700,000}{200,000} = 3.5$.</p> Signup and view all the answers

<p>The main difference between the current ratio and Acid Test Ratio is that the current ratio includes inventory in the calculation of current assets, while the Acid Test Ratio only includes quick assets (cash, bank, and debtors). The inclusion of inventory in the current ratio provides a broader measure of liquidity, while the Acid Test Ratio provides a more conservative measure by excluding inventory.</p> Signup and view all the answers