Advertisements
Advertisements
Question
Which of the following will increase Quick Ratio without affecting Current Ratio?
Options
Sale of Stock at Loss
Sale of Stock at Profit
Sale of Non-Current Investment at Cost
Sale of Stock at Cost
MCQ
Advertisements
Solution
Sale of Stock at Cost
Explanation:
The Current Ratio includes inventory, while the Quick Ratio excludes it. Selling stock at cost exchanges inventory for cash or debtors. This keeps total Current Assets exactly the same, leaving the Current Ratio unchanged. However, it increases Quick Assets because cash or debtors are added while the stock being removed was never part of quick assets. Since current liabilities stay constant, the Quick Ratio increases.
shaalaa.com
Is there an error in this question or solution?
