Question
A general insurance company has the following balances:
Current Assets = ₹12 lakh, Inventories = ₹2 lakh, Bank overdraft = ₹1.5 lakh, Other Current Liabilities = ₹4.5 lakh. Calculate the Adjusted Quick Ratio (Acid Test Ratio).Solution
Quick Assets = Current Assets – Inventory = ₹12 lakh – ₹2 lakh = ₹10 lakh Current Liabilities = Bank overdraft + Other CL = ₹1.5 lakh + ₹4.5 lakh = ₹6 lakh Quick Ratio = 10 / 6 = 1.67 → approx 1.6
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