Liquid Ratio of a company is equal to liquid assets divided by...........

Current Liabilities

The correct answer is option 2- Current Liabilities.

Liquid Ratio of a company is equal to liquid assets divided by Current Liabilities.

Quick or Liquid Ratio = It is the ratio of quick (or liquid) asset to current liabilities. It is expressed as Quick ratio = Quick Assets/Current Liabilities.

Current liabilities include short-term borrowings, trade payables (creditors and bills payables), other current liabilities and short-term provisions.
The quick assets are defined as those assets which are quickly convertible into cash. While calculating quick assets we exclude the inventories at the end and other current assets such as prepaid expenses, advance tax, etc., from the current assets.
Because of exclusion of non-liquid current assets it is considered better than current ratio as a measure of liquidity position of the business. It is calculated to serve as a supplementary check on liquidity position of the business and is therefore, also known as ‘Acid-Test Ratio’.