Question : Assertion (A): The ratio that results from dividing current assets by current liabilities is known as the liquid ratio.
Reason (R): Liquid Assets/Current Liabilities is the formula for calculating the liquid ratio.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False and Reason (R) is true
Correct Answer: Assertion (A) is False and Reason (R) is true
Solution :
The ratio between liquid assets and current liabilities is called the liquid ratio, often known as the fast ratio or acid test ratio. Only those products that can be converted into cash in 90 days or fewer are included in the category of liquid assets, which is a subset of current assets.
Liquid Assets/Current Liabilities is the formula for calculating the liquid ratio.
Option 4 is the correct answer.
