A firm has current assets of Rs. 800,000, including inventory of Rs. 200,000 and prepaid expenses of Rs. 50,000. Its current liabilities are Rs. 400,000. What is its quick ratio?
Correct answer: B. 1.38:1
- A. 1.25:1
- B. 1.38:1
- C. 1.63:1
- D. 2.00:1
Explanation
Quick assets equal Rs. 800,000 minus Rs. 200,000 inventory and Rs. 50,000 prepaid expenses, giving Rs. 550,000. Dividing by current liabilities of Rs. 400,000 gives a quick ratio of 1.375, approximately 1.38:1.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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