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?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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