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Hi,
How do we treat bank overdraft in Current or quick ratios, do we not include this as current liability? In Technical Articles on working capital management on ACCA website, under efficiency ratios example, overdraft seems to have been ignored in calculating these ratios.
Thanks,
NavneetThe bank overdraft is a current liability and is included in the calculation of the current ratio and the quick ratio (and has been included in the technical article when calculating the two ratios).
The efficiency ratios are nothing to do with the bank overdraft and are calculating how quickly we collect in receivables etc..
Do watch my free lectures on these. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
Hi John,
I looked at the ACCA article again and as you mentioned, it does include bank overdraft as expected in calculating current ratio and quick ratio.
Your lectures are very helpful.
Thanks,
Navneet
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