Quick ratio is calculated as X-y:z, where

Assessment: WAEC SSCE - Financial Accounting - 2019 (Objective) Subject: Financial Accounting

Question 1 Report

Quick ratio is calculated as X-y:z, where

Answer Details
The quick ratio is a measure of a company's ability to pay off its short-term debts with its most liquid assets. It is calculated by subtracting the value of a company's stock (raw materials, work in progress, finished goods) from its current assets, and then dividing the result by the company's current liabilities. So, the correct option is (3): x = current assets; y = stock and z = current liabilities. This is because the quick ratio formula subtracts the stock (inventory) value from the current assets to arrive at the most liquid assets available for paying off short-term obligations. And, the current liabilities reflect the company's immediate debts that must be paid off in the short term.
Read lesson note on Stock Valuation (JAMB)
Read lesson note on Principles Of Double Entry (JAMB)
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