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      Question

      In order to calculate (1) _______ ratio what needs to be

      deducted (2) _______?
      A Current; Prepaid expense Correct Answer Incorrect Answer
      B Quick; Stock Correct Answer Incorrect Answer
      C Current; Debtors Correct Answer Incorrect Answer
      D Quick; Debtors Correct Answer Incorrect Answer
      E Current; Cash & cash equivalents Correct Answer Incorrect Answer

      Solution

      The Quick Ratio focuses on the most liquid current assets by excluding inventory, which is not as readily convertible to cash, offering a stringent test of liquidity. While calculating quick assets we deduct Stock & Prepaid expenses from current assets.

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