Ratios

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shyam sharma (Querist)
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25 June 2012 What is the exact formula for calculating quick ratio? Whether we should assume all assets as quick assets except inventory? Or we should stick to the formula as under:

Quick Ratio= Cash+Bank+Debtors/Current Liabilities

If items like VAT & Income Tax Refund (which are there in the balance sheet since last 2-3 years) are appearing in current assets, whether we should consider them as quick assets?

Pls reply.

vignesh

vignesh (Expert)
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25 June 2012 Quick Ratio is an indicator of company's short-term liquidity. It measures the ability to use its quick assets (cash and cash equivalents, marketable securities and accounts receivable) to pay its current liabilities. Quick ratio formula is:

QR = cash + Marketable Securities + A/c's Receivables / C. L

Quick ratio specifies whether the assets that can be quickly converted into cash. No Refund is included.