______ is a measure of liquidity which excludes ________.
A. Liquid Ratio
B. Current Ratio
C. Debt equity Ratio
D. Inventory
E. Debtor
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A and D only
The Liquid (quick) Ratio is quick assets to current liabilities. Quick assets are current assets less inventories (and prepaid expenses), so the ratio is a stricter measure of liquidity than the current ratio.
A. Liquid Ratio — fills the first blank.
D. Inventory — fills the second blank; inventory is left out because it is not quickly convertible into cash.
B. Current Ratio — it takes all current assets, inventory included, so it excludes nothing.
C. Debt equity Ratio — it is a solvency ratio, not a measure of liquidity.
E. Debtor — debtors (trade receivables) are part of quick assets, so they are not excluded.
NCERT (2026-27 edition):
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