The Cash Ratio is computed as:
A(Cash + Debtors) / Current Liabilities
BQuick Assets / Current Liabilities
C(Cash + Bank + Marketable Securities) / Current Liabilities
DCash / Total Assets
Answer & Solution
Correct answer: C. (Cash + Bank + Marketable Securities) / Current Liabilities
1. Cash Ratio measures absolute liquidity.
2. Numerator = Cash + Bank balances + Marketable Securities (or Current Investments).
3. Denominator = Current Liabilities.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.1(c)_
Related questions
A firm has Current Ratio of 2 and Current Liabilities ₹4,00,000. If it pays off ₹1,00,000 Net Working Capital = ?A firm has Current Assets ₹6,00,000 (including Inventory ₹2,00,000 and Prepaid Expenses ₹5A satisfactory benchmark for the Acid-Test (Quick) Ratio is:Quick Ratio (Acid Test) excludes which of the following from Current Assets?A generally acceptable Current Ratio is: