The quick ratio of a firm is 2: 1. And Purchase of stock for cash is done by the company. Lets assume liquid assets is ₹200000 and current liabilities is of ₹100000. Purchase of stock of ₹50000 makes the stock to increase and cash to decrease by this amount of ₹50000. But stock is not include in liquid assets so there is no effect on stock only cash is decreased by 50000. So, liquid asset is 150000 and current liabilities ₹100000. Current ratio = 150000 / 100000 = 1.5:1 Hence,quick ratio reduce. |