Question

    In order to calculate (1) _______ ratio what needs to be

    deducted (2) _______?
    A Current; Prepaid expense Correct Answer Incorrect Answer
    B Quick; Stock Correct Answer Incorrect Answer
    C Current; Debtors Correct Answer Incorrect Answer
    D Quick; Debtors Correct Answer Incorrect Answer
    E Current; Cash & cash equivalents Correct Answer Incorrect Answer

    Solution

    The Quick Ratio focuses on the most liquid current assets by excluding inventory, which is not as readily convertible to cash, offering a stringent test of liquidity. While calculating quick assets we deduct Stock & Prepaid expenses from current assets.

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