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    • Question

      All its JV IT Ltd has total current assets worth

      ₹9,00,000, of which inventory is ₹2,00,000. Current liabilities stand at ₹5,60,000. What will be its acid-test ratio?
      A 1.61 Correct Answer Incorrect Answer
      B 1.25 Correct Answer Incorrect Answer
      C 1.96 Correct Answer Incorrect Answer
      D 0.80 Correct Answer Incorrect Answer
      E 0.62 Correct Answer Incorrect Answer

      Solution

      Acid Test Ratio or Quick Ratio = (Current Assets – Inventory) / Current Liabilities = (9,00,000 – 2,00,000) / 5,60,000 = 1.25 times approximately. This is a liquidity ratio that reflects the company’s ability to meet short-term obligations without relying on stock liquidation.

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