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Kit Question Kaplan

MM074y ago
It says to find quick acid ratio Current asset 528855 Inventory 109400 Current liabilities 430680 Taxation liability 55000 It is simply dividing, (CA-Inventory/CL) which give 0.97. Why it is not subtracting Taxation from current liability as it clearly says in book that quick liabilities does not include taxation as it is paid in period more than 6 weeks (1.5 months).
John MoffatJohn MoffatTutor4y ago#1
I have no idea why your book has said that - you need to ask Kaplan. What I state in my lectures is correct and is that all current liabilities are included in the calculation. There are no such things as 'quick liabilities' - liabilities are either current or non-current, and if the tax is payable within 6 weeks it is a current liability (and tax would almost certainly always be a current liability!
MM074y ago#2
Professor, do we subtract Prepaid Expenses also in the nominator?
John MoffatJohn MoffatTutor4y ago#3
No - it is all current assets (except for inventory) divided by all current liabilities.
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