lakshay (ipcc) (581 Points)
09 October 2011i know that for calculating quick ratio this formula is used
current assests- stock - prepaid exp / current liabiltes
but sometimes in denominator why we use liquid assets?...how will we know that in question what we have to use..current liabitles or quick liabiltes? becoz both are known as quick ratio
kanagaraj
(CHARTERED ACCOUNTANT)
(793 Points)
Replied 09 October 2011
only current liabilities to be used to find the quick ratio. Not quick liabilities
CA Rajat Jain
(CA)
(1677 Points)
Replied 09 October 2011
both forumalas are correct , u can use according to ur use , answer wil be different in both formulas but wil be correct
Rahul
(Chartered Accountnat CS)
(1585 Points)
Replied 09 October 2011
See upto 12th class what we studied was current liablities
But ,in reality as well as CA syllabus we should use quick liabilites/liquid liabilities
QUICK LIABILITIES = CURRENT LIABILITIES (-) BANK OD (-) CASH CREDITS
The reason being that we need to find out Quick Ratio which itserlf means "ABILITY OF A FIRM TO MEET ITS IMMEDIATE LIABILITIES" and bank o/d and cash credit always fluctuating i.e. they remain throughout the year.
Rahul Suneja
(CA-Final, CS-Exec)
(215 Points)
Replied 09 October 2011
the main difference between quick ratio and current ratio is quick liabilities in case of quick ratio quick liabilities are used whereas in current ratio current liabilities are used
quick liabilities=current liabilities-bank overdraft
as it is not to be paid immediately
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