To calculate the Current Ratio, Quick Ratio, and Absolute Liquid Ratio, we must use the following formulas and the given data:

1. Current Ratio

$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$

• Current Assets = Stock in Trade + Cash in Hand + Prepaid Expenses + B/R $\text{Current Assets} = 1,00,000 + 40,000 + 5,000 + 45,000 = 1,90,000$
• Current Liabilities = Creditors + B/P $\text{Current Liabilities} = 60,000 + 10,000 = 70,000$ $\text{Current Ratio} = \frac{1,90,000}{70,000} = 2.71$

2. Quick Ratio

$\text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}$

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

3. Absolute Liquid Ratio

$\text{Absolute Liquid Ratio} = \frac{\text{Absolute Liquid Assets}}{\text{Current Liabilities}}$

• Absolute Liquid Assets = Cash in Hand + B/R $\text{Absolute Liquid Assets} = 40,000 + 45,000 = 85,000$
• Current Liabilities = 70,000 (as before). $\text{Absolute Liquid Ratio} = \frac{85,000}{70,000} = 1.21$

Final Answers:

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

Would you like a detailed explanation for any of these calculations?

Here are 5 related questions for further understanding:

1. What does a Current Ratio higher than 2 indicate for a company?
2. Why is the Quick Ratio sometimes more reliable than the Current Ratio?
3. How does the inclusion of Prepaid Expenses in Current Assets affect liquidity analysis?
4. What are the practical implications of a high Absolute Liquid Ratio for a firm's creditors?
5. How do these ratios influence decision-making for short-term financing?

Tip: Always compare these ratios with industry standards for a better assessment of financial health.