Question : Which of the following statements is incorrect?
Option 1: The quick ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately.
Option 2: The quick ratio is calculated by dividing liquid assets (Quick Current Assets) by current liabilities.
Option 3: 'Liquid assets' means those assets which will be converted into cash and cash equivalents very shortly.
Option 4: None of the above
Correct Answer: The quick ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately.
Solution : Answer = The quick ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately.
The quick ratio assesses the firm's ability to meet short-term liabilities, but not necessarily within a specific timeframe, like a month. The quick ratio evaluates a company's ability to settle its short-term obligations using its most liquid assets. Liquid assets, such as cash, marketable securities, and accounts receivable, are those that can be readily converted into cash. The ratio is calculated by dividing these liquid assets by current liabilities . Hence, the correct option is 1.
Question : Which of the following is the correct formula for "Current Ratio"?
Question : ---------------- are the assets which are likely to be converted into cash or cash equivalents within 12 months from the date of the Balance Sheet or within the period of an operating cycle.
Question : The Current Liabilities of a Company are Rs.7,00,000. Its current ratio is 3.5: 1 and its acid test ratio is 1.5: 1. The value of Current assets, Liquid assets and Inventories are
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