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Need for Cash Flow Statement

Which of the ...

Question

Which of the following ratios is termed as 'acid test ratio' or 'quick ratio'?

A

Fixed assets Ratio

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B

Current Ratio

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C

Liquidity ratio

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D

Debt-Equity ratio

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Solution

The correct option is C Liquidity ratio
Liquidity ratio measures the company's ability to pay debt obligations and its margin of safety through the calculation of metrics including the current ratio and quick ratio. It also indicates cash flow positioning. It is also called as acid test ratio and quick ratio.

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Q. Which one of the following is correct?
i) A ratio is an arithmetical relationship of one number to another number.
ii) Quick ratio is also known as acid test ratio.
iii) Rule of thumb for current ratio is

2 : 1

.
iv) Debt equity ratio is the relationship between outsiders fund and shareholders fund.

Q. Liquidity ratio is also known as :-
a. Quick ratio
b. Acid test ratio
c. Working capital ratio
d. Stock turnover ratio

Q. (a) From the following information, compute Debt-Equity Ratio:
Long Term Borrowings - 2,00,000
Long Term Provisions - 1,00,000
Current Liabilities - 50,000
Non-current-Assets - 3,60,000
Current-Assets - 90,000
(b) The current ratio of X. Ltd is 2 : 1. State with reason which of the following transaction would (i) increase; (ii) decrease or (iii) not change the ratio.
(1) Included in the trade payables was a bills payable of Rs 9,000 which was met on maturity.
(2) Company issued 1,00,000 equity shares of Rs 10 each to the Vendors of machinery purchased.

Q. Calculate Current Ratio, Quick Ratio and Debt to Equity Ratio from the figures given below:


Particulars		₹
Inventory		30,000
Prepaid Expenses		2,000
Other Current Assets		50,000
Current Liabilities		40,000
12% Debentures		30,000
Accumulated Profits		10,000
Equity Share Capital		1,00,000
Non-current Investments		15,000

Q. Given current ratio =

2.5

1.5

Net working capital = Rs

30, 000

What is the amount of quick assets?

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