Liquid Ratio is also known as: (A) Current Ratio (B) Quick Ratio (C)…

Liquid Ratio is also known as:

(A) Current Ratio

(B) Quick Ratio

(D) Working Capital Ratio

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (B) and (C) only

The liquid ratio compares quick (liquid) assets with current liabilities. Quick assets leave out inventories and prepaid expenses because they cannot be turned into cash at once. The same ratio goes by two other names: quick ratio and acid-test ratio.

(A) Current Ratio Incorrect. The current ratio compares all current assets, inventories included, with current liabilities, so it is a different ratio.

(B) Quick Ratio Correct. The liquid ratio is also called the quick ratio.

(C) Acid- Test Ratio Correct. Because it is a stricter check on liquidity than the current ratio, it is also known as the acid-test ratio.

(D) Working Capital Ratio Incorrect. The book treats the working capital ratio as a ratio of its own, listed beside the current ratio and the liquid ratio and expressed in times, so it is not another name for the liquid ratio.

NCERT (2026-27 edition):
Quick or Liquid Ratio

Extract from the NCERT textbook

NCERT (2026-27 edition):
Quick or Liquid Ratio – “… 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’.”