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A firm has Current Assets ₹6,00,000 (including Inventory ₹2,00,000 and Prepaid Expenses ₹50,000) and Current Liabilities ₹2,50,000. Quick Ratio is:
A2.0:1
B1.5:1
C2.4:1
D1.4:1
Answer & Solution
Correct answer: D. 1.4:1
1. Quick Assets = 6,00,000 − 2,00,000 − 50,000 = ₹3,50,000.
2. Quick Ratio = 3,50,000 / 2,50,000 = 1.4 times.
3. Above the 1:1 benchmark, so liquidity is satisfactory.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.1(b)_
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