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Quick Ratio (Acid Test) excludes which of the following from Current Assets?
AInventories and Prepaid expenses
BSundry Debtors
CCash and Bank balances
DMarketable securities
Answer & Solution
Correct answer: A. Inventories and Prepaid expenses
1. Quick Assets = Current Assets − Inventories − Prepaid expenses.
2. Inventories are excluded as they may not be near-cash assets.
3. Quick Ratio = Quick Assets / Current Liabilities.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.1(b)_
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