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- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- October 24, 2021 at 10:20 am #638968
It says to find quick acid ratio
Current asset 528855
Inventory 109400
Current liabilities 430680
Taxation liability 55000It 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).
October 24, 2021 at 3:02 pm #638997I 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!
October 25, 2021 at 3:09 am #639028Professor, do we subtract Prepaid Expenses also in the nominator?
October 25, 2021 at 8:49 am #639047No – it is all current assets (except for inventory) divided by all current liabilities.
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