Question

The quick ratio of a company is 0.5 : 0.75. Will cash sales of ₹ 5,000 increase, decrease or not change the ratio? Give reason in a support of your answer.

Answer 1

Quick Ratio will increase as quick assets will increase but no change in current liabilities.

Working note:

Quick Ratio = 0.50 : 0.75 = ₹ 50,000 : 75,000 (Assume)

= `(50,000+5,000)/(75,000+0)`

= `(5,50,000)/(75,000)`

= 0.55 : 0.75