One of the most important assumptions behind the calculation of quick ratio is that
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The quick ratio is calculated by adding cash, cash equivalents, short-term investments, and current receivables together then dividing them by current liabilities. Sometimes company financial statements don't give a breakdown of quick assets on the balance sheet.
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The answer for the following question is given below
Explanation:
The liquid ratio or quick ratio is found from the quick assets, to find quick assets we have to subtract Prepaid expenses and Stock from current assets
According to the quick assets assumption, it is to be estimated that quick assets contain only, that type of current assets that can be converted into cash within a very short period.
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