i 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
only current liabilities to be used to find the quick ratio. Not quick liabilities
both forumalas are correct , u can use according to ur use , answer wil be different in both formulas but wil be correct
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.
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
CAclubindia
