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  • Liquidity: Less: Inventories Less: Prepaid Expenses

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    sailee sharma
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    This document discusses three liquidity ratios used to assess short-term solvency and financial health: the current ratio, quick ratio, and absolute cash ratio. The current ratio compares current assets to current liabilities. The quick ratio compares quick assets (current assets minus inventories) to current liabilities. The absolute cash ratio compares cash and marketable securities to current liabilities. Formulas for calculating each ratio are provided along with descriptions of what is included in the numerators and denominators.

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    This document discusses three liquidity ratios used to assess short-term solvency and financial health: the current ratio, quick ratio, and absolute cash ratio. The current ratio compares current assets to current liabilities. The quick ratio compares quick assets (current assets minus inventories) to current liabilities. The absolute cash ratio compares cash and marketable securities to current liabilities. Formulas for calculating each ratio are provided along with descriptions of what is included in the numerators and denominators.

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    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
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    6 views1 page

    Liquidity: Less: Inventories Less: Prepaid Expenses

    Uploaded by

    sailee sharma
    This document discusses three liquidity ratios used to assess short-term solvency and financial health: the current ratio, quick ratio, and absolute cash ratio. The current ratio compares current assets to current liabilities. The quick ratio compares quick assets (current assets minus inventories) to current liabilities. The absolute cash ratio compares cash and marketable securities to current liabilities. Formulas for calculating each ratio are provided along with descriptions of what is included in the numerators and denominators.

    Copyright:

    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
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    of 1

    A.

    LIQUIDITY RATIOS - Short Term Solvency


    Formula
    Ratio
    1.

    Current Assets
    Current Liabilities

    Current Ratio

    Quick Assets
    Quick Liabilities

    2. Quick Ratio or Acid


    test ratio

    3. Absolute Cash Ratio

    (Casb+Marketable
    Securities)
    Current Liabilities

    Numerator
    Inventories
    + Debtors
    + Cash & Bank
    + Receivables / Accruals
    + Short terms Loans
    + Marketable Investments

    Denominator
    Sundry Creditors (for goods)
    + Outstanding Expenses (for services)
    + Short Term Loans &Advances (Cr.)
    + Bank Overdraft / Cash Credit
    + Provision for taxation
    + Proposed or Unclaimed Dividend

    Abi
    term

    Current Liabilities

    Abi

    Bank Overdraft
    Cash Credit

    liabi

    Current Assets
    Less : Inventories
    Less : Prepaid Expenses

    Cash in Hand
    + Balance at Bank (Dr.)
    + Marketable Securities &
    short term investments

    Less :
    Less :

    com
    Solv
    Rati
    curr

    Sundry Creditors (for goods) Ava

    + Outstanding Expenses (for services) term


    + Short Term Loans &Advances (Cr.)
    + Bank Overdraft / Cash Credit
    + Provision for taxation
    + Proposed or Unclaimed Dividend

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