In this case both Current Assets and Current Liabilities are to be taken into consideration.
Current Assets include:
- Prepaid expenses
 - Cash in bank and hand
 - Sundry debtors
 - Stocks and receivable bills
 - Short term investments
 - Marketable securities
 - Accrued income
 
Current Ratio = Current Assets/ Current Liabilities
Current Liabilities include:
- Bank overdraft
 - Payable bills
 - Sundry creditors
 - Advance income
 - Outstanding expenses
 - Income tax provision
 - Payable dividend
 - Bad debt provision
 
Liquid/Acid test/Quick Ratio are:
Liquid Liabilities/ Liquid Assets (or) LA/CL or Acid Test Ratio = Quick assets/ Quick Liabilities
Liquid liabilities or quick liabilities = All current liabilities except bank overdraft
Liquid Assets or quick assets = All current assets except stock
Net working Capital Ratio = Net working Capital / Net Assets
Net working capital = Current assets – Current liabilities
Cash Position Ratio = (Cash + Marketable Securities)/Current Liabilities
Solvency Ratio = Outside Liabilities/ Total Assets
Links of Previous Main Topic:-
- Introduction to accounting and branches of accounting
 - Preparation of final accounts
 - Introduction of fund flow statement
 - Introduction cash flow statement
 - Ratio analysis significance of ratio analysis
 - Advantages of ratio analysis
 - Limitation of ratio analysis
 - Classification of ratios
 
Links of Next Finance Topics:-