A company’s quick ratio is 1.2. If inventory were purchased for cash, the:
As the quick ratio includes cash but no inventory, there will be a change in the numerator on account of decrease in cash (which is a current asset). Denominator will remain unchanged. So overall, quick ratio will decrease after this change. For example: if quick ratio is 1.2, and if current assets are 1200 and current liabilities are 1000 (1200/1000 =1.2). if we purchase inventory (let’s say for Rs 100), then it will not make a difference in quick assets which exclude inventory. But they include cash, then there will be a reduction in quick assets. Quick assets then will become: 1200 -100 = 1100. There is no change in a liability here. So new quick ratio will become: 1100/1000 = 1.1. So, clearly answer will be (a). There is a reduction in a numerator and result is a lesser quick ratio as compared to the previous one.
Who among the following assesses is NOT liable to pay advance tax?
Purchase of a laptop for office use wrongly debited to Purchase Account. It is an error of
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The term ‘ Previous year’ is defined under which section of Income Tax Act?
Which major factor led to high levels of debt among Indian telecom operators?
Which of the following is not a mandatory financial statement of a General Insurance Company as per IRDA regulations?
The main object of the audit of the cash book may be ________.
Which Income Computation and Disclosure Standard (ICDS) deals with "The Effects of Changes in Foreign Exchange Rates"?
Which of the following is not a type of buyer on the GeM?
Which of the following transactions is capital expenditure?