STANDARD NORM OF THE CURRENT RATIO

Implication of High Ratio of Current Assets over the
Current Liabilities
High ratio leads to greater the volume of current assets more than the specified norm denotes that the firm possess excessive current assets than the requirement portrays idle funds invested in the current assets.
Limitation of the Current Ratio
Under this ratio, the current assets are equally weighed each other to match the current liabilities. Under the current ratio, One rupee of cash is equally weighed at par with the one rupee of closing stock, but the closing stock and prepaid expenses cannot be immediately realized like cash and marketable securities.
Acid Test Ratio
It is a ratio expresses the relationship in between the quick assets and current liabilities. This ratio is to replace the bottleneck associated with the current ratio. It considers only the liquid assets which can be easily translated into cash to meet out the financial commitments
Super Quick Assets Ratio
It is the ratio which establishes the relationship in between the super quick assets and
quick liabilities of the firm. The super quick assets are nothing but the current assets which can be more easily converted into cash to meet out the quick liabilities. The super quick liabilities are the current liabilities should have to be met out at faster pace within shorter span in duration.
Super Quick Assets = Cash + Marketable Securities .
Super Quick Liabilities= Current Liabilities – Bank Over Draft


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