The Quick Ratio of a company is $0.8 : 1$ . State whether the Quick Ratio will improve, decline or will not change in the following cases:
(i) Cash collected from Debtors $R s . 50, 000$
(ii) Creditors of $R s . 20, 000$ paid off.

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Solution

Let Quick Assets = $R s . 80000$ and Current Liabilities = $R s . 100000$
Quick Ratio = Quick assets/Current liabilities
= $80000 / 100000$
= $0.8 : 1$
Now,
(i) When $R s . 50000$ cash is collected from debtors there would be no net increase or decrease in the quick assets as the cash balance would increase and the debtors balance would decrease simultaneously. And so the Quick ratio would not change.
(ii) When creditors of $R s . 20000$ are paid off then there would be decrease in both the creditors balance and the cash balance. The revised Quick ratio = $[80000 - 20000] / [100000 - 20000]$
= $0.75 : 1$
And so quick ratio would decline in this scenario.

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Q. The Quick Ratio of a company is 0.8:1. State with reason, whether the following transactions will increase, decrease or not change the Quick Ratio:
(i) Purchase of loose tools for ₹2,000; (ii) Insurance premium paid in advance ₹500; (iii) Sale of goods on credit ₹3,000; (iv) Honoured a bills payable of ₹5,000 on maturity.

Q. Quick Ratio of a company is 2:1. State giving reasons, which of the following transactions would (i) improve, (ii) reduce, (iii) Not change the Quick Ratio:
(a) Purchase of goods for cash; (b) Purchase of goods on credit; (c) Sale of goods (costing ₹10,000) for ₹10,000; (d) Sale of goods (costing ₹10,000) for ₹11,000; (e) Cash received from Trade Receivables.

Q. State giving reasons, which of the following transactions would improve, reduce or not change the Current Ratio, if Current Ratio of a company is (i) 1:1; or (ii) 0.8:1:
(a) Cash paid to Trade Payables.
(b) Purchase of Stock-in-Trade on credit.
(c) Purchase of Stock-in-Trade for cash.
(d) Payment of Dividend payable.
(e) Bills Payable discharged.
(f) Bills Receivable endorsed to a Creditor.
(g) Bills Receivable endorsed to a Creditor dishonoured.

Quick ratio of a company is 1 : 1. State giving reasons (for any four), which of the following would improve, reduce or not change the ratio ?

(i) Purchase of machinery for cash.
(ii) Purchase of goods on credit.
(iii) Sale of furniture at cost.
(iv) Sale of goods at a profit.
(v) Redemtption of debentures at a premium.

Q. State giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2:1:
(a) Cash paid to Trade Payables.
(b) Bills Payable discharged.
(c) Bills Receivable endorsed to a creditor.
(d) Payment of final Dividend already declared.
(e) Purchase of Stock-in-Trade on credit.
(f) Bills Receivable endorsed to a Creditor dishonoured.
(g) Purchases of Stock-in-Trade for cash.
(h) Sale of Fixed Assets (Book Value of ₹50,000) for ₹45,000.
(i) Sale of FIxed Assets (Book Value of ₹50,000) for ₹60,000.

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The Quick Ratio of a company is 0.8:1. State whether the Quick Ratio will improve, decline or will not change in the following cases:(i) Cash collected from Debtors Rs.50,000(ii) Creditors of Rs.20,000 paid off.

The Quick Ratio of a company is $0.8 : 1$ . State whether the Quick Ratio will improve, decline or will not change in the following cases:
(i) Cash collected from Debtors $R s . 50, 000$
(ii) Creditors of $R s . 20, 000$ paid off.