A firm has a Current Ratio of 2.5 and a Quick Ratio of 1.2. If the Current Liabilities are 500,000, what is the value of the Inventory?

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SSC Audit Tax Finance P-II QUESTION #6160

Question 1

A firm has a Current Ratio of 2.5 and a Quick Ratio of 1.2. If the Current Liabilities are $500,000, what is the value of the Inventory?

Correct Answer Explanation

Current Assets (CA) = 2.5 * 500k = 1.25M. Quick Assets (QA) = 1.2 * 500k = 600k. Inventory = CA - QA = 1.25M - 600k = 650k.