how to calculate quick ratio in sole proprietorship
Answers
Answer:
how to calculate quick ratio in sole proprietorship
Explanation:
Way of calculation of Quick Ratio is the same whether it is for a sole proprietorship or a firm or a company etc.
What is Quick ratio
Before it is informed what is a quick ration, one should understand' what is a Current Ratio.
Calculation of Current Ratio
It is also called a liquidity ratio. Means it tell the investors how a unit can maximise current assets and satisfy the liabilities means in which ratio. Here Assets & Liabilities means which are receivable/payable in one year.
The formula is = Current Assets/Current Liabilities
Quick Ratio
In this ratio super liquidity items are retained and other assets are ignored. The items ignored are Inventories/Prepaids
Hence Quick Ratio will be
Current Assets (--) Inventories and Prepaids / Current Liabilities