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Answer Posted / neerajkumar.che
Hello freind,
Quick ratio or Acid test ratio is conservative way to
measure the liquidity of a company.
Quick Ratio=(Current Asset- Inventories)/current Liablities
Inventories are exclude in case as inventories are slow
moving current asset or it may be obselete or it could be
pledged to others.So we exlude to get more refined
liquidity position of company.Sometime we also exclude
prepayment as prepayment is ment for next financial year
and has no significance at date as liquidity is concerned.
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