Question

Quick ratio of Megamart Ltd. is 1.5:1. Which of the following transactions will result in a decrease in this ratio?

• A. Sale of goods costing \rupee 10,000 for \rupee 12,000
• B. Cash collected from trade receivables \rupee 41,000
• C. Purchase of goods for cash \rupee 38,000
• D. Creditors were paid \rupee 11,000

Hint:

Quick assets exclude inventories and prepaid expenses. Cash and receivables are key components.

Answer 1

The Correct Option is C

The quick ratio is calculated as: \[ \text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}} \] Purchasing goods for cash reduces quick assets (cash), as inventory is not included in quick assets. This decreases the numerator, leading to a lower quick ratio.