New Upcoming Legal Jobs Free Workshop March 11 at 5 PM. Register here

    Question

    When calculating Quick Assets, it is important to

    exclude certain items from Current Assets to accurately measure a company's liquidity. Quick Assets provide a more stringent measure of liquidity by considering only the most liquid assets. Which items are excluded from Current Assets when calculating Quick Assets?
    A Fixed Assets & Inventory Correct Answer Incorrect Answer
    B Debtors & Creditors Correct Answer Incorrect Answer
    C Inventory & Prepaid Expenses Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E Preliminary Expenses & Advance Tax Correct Answer Incorrect Answer

    Solution

    Quick Assets are calculated by excluding Inventory and Prepaid Expenses from Current Assets. Inventory is excluded because it may not be quickly converted into cash without a loss of value, and Prepaid Expenses are payments made for services not yet received, which cannot be converted into cash. The calculation focuses on the most liquid assets, such as cash, marketable securities, and receivables.

    Practice Next