Question

Which of the following item is not taken into account while computing Quick Ratio?1

(a) Bank Account (b) Cash (c) Bank Loan (d) creditors​

Answer 1

Explanation:

Quick Ratio = [Current assets minus Inventory and prepaid expenses] /

[Current liabilities minus Bank overdraft/ Cash credit]

Here inventory is considered as less secure than other current assets and prepaid expenses as the name suggests are paid in advance for a reason, bank overdraft and cash credit are usually secured against inventory and so all these 4 items are excluded while calculating quick ratio.