Identify which of the following are normally computed to identify the liquidity of the Business ?
(A) Proprietary Ratio
(B) Interest Coverage Ratio
(C) Quick Ratio
(D) Debt Equity Ratio
(E) Current Ratio

Choose the correct answer from the options given below :
(

This question was previously asked in

Shift 26/05/2023 8:30 AM - 10:30 AM

(A), (C) and (E) only

(A), (B) and (C) only

(B), (D) and (E) only

Correct Answer

Current Ratio:

Formula: Current Ratio = Current Assets / Current Liabilities
The current ratio measures a company's ability to cover its short-term obligations with its short-term assets. A ratio greater than 1 indicates that the company has more assets than liabilities in the short term.

Quick Ratio (Acid-Test Ratio):

Formula: Quick Ratio = (Current Assets - Inventory) / Current Liabilities
The quick ratio provides a more stringent measure of short-term liquidity by excluding inventory, which may take time to convert into cash. It reflects a company's ability to cover immediate liabilities without relying on the sale of inventory.

Practice on the go with our mobile app

A and B are partners sharing profit in the ratio of 3: 2. On 31st March, 2023, the Capital Account balance stood as A 1,29,000 and B 86,000. The divisible profit of 50,000 has been distributed between A and B accordingly and Interest on capital @ 10% p.a. has also been credited. A has also obtained salary @ 10,000 annually. Calculate Interest on B's capital.
(