Quick Ratio of Z Ltd. is 1:1. State, with reason, which of the following transactions would (i) Increase (ii) Decrease (iii) Not change the ratio.
(a) Included in the trade payables was bill payable of Rs.3,000 which was met on maturity.
(b) Debentures of Rs.50,000 were converted into equity shares.
Dear Student
We know that ,
Quick ratio =
1. When a bills payable was included in trade payable : here both the Bills payable and trade payable are current liability , hence it would not affect the Ratio.
2.When Debentures of 50,000 were converted into equity shares : Here Debentures or Equity shares , both are neither Current Asset or Current Liability ,Hence it would not affect the Ratio .
Regards
We know that ,
Quick ratio =
1. When a bills payable was included in trade payable : here both the Bills payable and trade payable are current liability , hence it would not affect the Ratio.
2.When Debentures of 50,000 were converted into equity shares : Here Debentures or Equity shares , both are neither Current Asset or Current Liability ,Hence it would not affect the Ratio .
Regards