Question

The quick ratio of a company is 0.75 : 0.50. Will credit purchase of goods ₹ 10,000 increase, decrease or not change the ratio? Give reason in support of your answer.

Answer 1

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

Working Note:

Quick Ratio = `(₹75,000 ("Assumed"))/(₹50,000 ("Assumed"))`

= `(₹75,000+0)/(₹ 50,000 + 10,000)`

= 0.75 : 0.60