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Question
What is Liquid Ratio?
Short Answer
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Solution
The Liquid Ratio, or the Quick Ratio, measures a company’s capacity to pay off current creditors without selling goods. It is a stricter liquidity test than the current ratio since it separates inventories from current assets. The formula of the liquid ration is:
`"Quick Ratio"=("Current Assets − Inventory")/("Current Liability")`
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