To evaluate the three ratios — Current Ratio, Quick Ratio, and Absolute Liquid Ratio — we first need to classify the given data into current assets and current liabilities:

Provided data:

1. Stock in Trade: ₹1,00,000
2. Creditors: ₹60,000
3. Bills Payable (B/P): ₹10,000
4. Cash in Hand: ₹40,000
5. Prepaid Expenses: ₹5,000
6. Bills Receivable (B/R): ₹45,000

Step 1: Categorize the items:

Current Assets:

• Stock in Trade: ₹1,00,000
• Bills Receivable: ₹45,000
• Cash in Hand: ₹40,000
• Prepaid Expenses: ₹5,000

Total Current Assets = ₹1,00,000 + ₹45,000 + ₹40,000 + ₹5,000 = ₹1,90,000

Current Liabilities:

• Creditors: ₹60,000
• Bills Payable (B/P): ₹10,000

Total Current Liabilities = ₹60,000 + ₹10,000 = ₹70,000

Step 2: Calculate the Ratios:

i. Current Ratio:

$\text{Current Ratio} = \frac{\text{Total Current Assets}}{\text{Total Current Liabilities}}$ $\text{Current Ratio} = \frac{1,90,000}{70,000} = 2.71 : 1$

ii. Quick Ratio:

$\text{Quick Assets} = \text{Current Assets} - \text{Stock in Trade} - \text{Prepaid Expenses}$ $\text{Quick Assets} = 1,90,000 - 1,00,000 - 5,000 = 85,000$ $\text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}$ $\text{Quick Ratio} = \frac{85,000}{70,000} = 1.21 : 1$

iii. Absolute Liquid Ratio:

$\text{Absolute Liquid Assets} = \text{Cash in Hand} + \text{Bills Receivable}$ $\text{Absolute Liquid Assets} = 40,000 + 45,000 = 85,000$ $\text{Absolute Liquid Ratio} = \frac{\text{Absolute Liquid Assets}}{\text{Current Liabilities}}$ $\text{Absolute Liquid Ratio} = \frac{85,000}{70,000} = 1.21 : 1$

Final Results:

1. Current Ratio: 2.71 : 1
2. Quick Ratio: 1.21 : 1
3. Absolute Liquid Ratio: 1.21 : 1

Do you want more details on these calculations or concepts?
Here are some related questions to explore further:

1. What is the significance of each ratio in evaluating a company’s liquidity?
2. How does excluding stock improve the accuracy of the quick ratio?
3. What industries benefit from a higher absolute liquid ratio?
4. What are potential risks of having very high current ratios?
5. How can prepaid expenses distort liquidity measurements?

Tip: Ensure the data for liabilities and assets is accurate and complete, as errors can distort the ratios significantly!