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How to calculate quick ratio in sole proprietorship ​

Answer»

how to calculate quick RATIO in sole proprietorship ​Explanation:Way of calculation of Quick Ratio is the same whether it is for a sole proprietorship or a firm or a COMPANY etc.What is Quick ratioBefore it is informed what is a quick ration, one should understand' what is a Current Ratio.Calculation of Current Ratio It is also called a liquidity ratio.  Means it tell the investors how a UNIT can maximise current assets and satisfy the liabilities means in which ratio.  Here Assets & Liabilities means which are receivable/payable in one year.The formula is =   Current Assets/Current LiabilitiesQuick RatioIn this ratio SUPER liquidity items are RETAINED and other assets are ignored.  The items ignored are Inventories/PrepaidsHence Quick Ratio will beCurrent Assets (--) Inventories and Prepaids /  Current Liabilities



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