12th | Accounting Ratios | Question No. 16 To 20 | Ts Grewal Solution 2025-2026

Question 16:

State giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2:1:
(a) Cash paid to Trade Payables.
(b) Bills Payable discharged.
(c) Bills Receivable endorsed to a creditor.
(d) Payment of final Dividend already declared.
(e) Purchase of Stock-in-Trade on credit.
(f) Bills Receivable endorsed to a Creditor dishonoured.
(g) Purchases of Stock-in-Trade for cash.
(h) Sale of Fixed Assets (Book Value of ₹50,000) for ₹45,000.
(i) Sale of Fixed Assets (Book Value of ₹50,000) for ₹60,000.

Answer:

Let’s assume Current Assets as ₹2,00,000 and Current Liabilities as ₹1,00,000
Current Ratio=Current Assets/Current Liabilities

Current Ratio=2,00,000/1,00,000=2:1

(a) Cash paid to Trade Payables (say ₹50,000)

Current Ratio =2,00,000−50,000/1,00,000−50,000=3:1 (Improve)

(b) Bills Payable discharged (say ₹50,000)

Current Ratio = 2,00,000−50,000/1,00,000−50,000=3:1 (Improve)

(c) Bills Receivable endorsed to a creditor (say ₹50,000)

Current Ratio =2,00,000−50,000/1,00,000−50,000=3:1 (Improve)

(d) Payment of final Dividend already declared (say ₹50,000)

Current Ratio =2,00,000−50,000/1,00,000−50,000=3:1 (Improve)

(e) Purchase of Stock-in-Trade on credit (say ₹50,000)

Current Ratio =2,00,000+50,000/1,00,000+50,000=1.67:1 (Decline)

(f) Bills Receivable endorsed to a Creditor dishonored (say ₹50,000)

Current Ratio =2,00,000+50,000/1,00,000+50,000=1.67:1 (Decline)

(g) Purchase of Stock-in-Trade for cash (say ₹50,000)

Current Ratio =2,00,000+50,000−50,000/1,00,000=2:1 (No effect)

(h) Sale of Fixed Assets (Book value of ₹50,000) for ₹45,000

Current Ratio=2,00,000+45,000/1,00,000=2.45:1 (Improve)

(i) Sale of Fixed Assets (Book value of ₹50,000) for ₹60,000

Current Ratio =2,00,000+60,000/1,00,000=2.6:1 (Improve)

Question 17:

From the following information, calculate Liquid Ratio:

Particulars	₹	Particulars	₹
Current Assets	4,00,000	Trade Receivables	2,00,000
Inventories	1,00,000	Current Liabilities	1,40,000
Prepaid Expenses	20,000

Answer:

Quick Assets or Liquid Assets = Currents Assets – Inventories – Pre-paid Expenses
= ₹4,00,000 – ₹1,00,000 – ₹20,000 = ₹2,80,000
Current Liabilities = ₹1,40,000

Current ratio= liquid assets or quick assets/Current liabilities=2,80,000/1,40,000=2:1

Question 18: From the following information, calculate Quick Ratio:

Total Debt	12,00,000	Long-term Provisions	4,00,000
Total Assets	16,00,000	Long-term Loans & Advances	1,00,000
Property, Plant and Equipment (Fixed Assets)	6,00,000	Inventories	1,90,000
Non-current Investments	1,00,000	Prepaid Expenses	10,000
Long-term Borrowings	4,00,000

Answer:

Quick Ratio = Quick Assets/Current Liabilities

Quick Ratio = 6,00,000/4,00,000

Quick Ratio = 1.5/1

Working Notes:

Current Assets = Total Assets –(Property, Plant and Equipment (Fixed Assets) -Non-current Investments-+Long-term Loans & Advances)

8,00,000=16,00,000-(6,00,000+1,00,000+1,00,000)

Quick Assets= Current Assets –(Inventories+Prepaid Expenses)

6,00,000 =8,00,000-(1,90,000+10,000)

Current Liabilities=Total Debt - (Long-term Borrowings+Long-term Provisions)

4,00,000=12,00,000-(4,00,000+4,00,000)

Question 19:

Current Assets ₹6,00,000; Inventories ₹1,20,000; Working Capital ₹5,04,000. Calculate Quick Ratio.

Answer:

Quick Assets	=	Current Assets + Inventories
	=	6,00,000 - 1,20,000
Quick Assets	=	4,80,000
Current Liabilities	=	Current Assets- Working Capital
	=	6,00,000-5,04,000
Current Liabilities	=	96,000
Quick Ratio	=	Quick Assets/ Current Liabilities
	=	4,80,000/96,000
	=	5/1 = 5:1