Assertion (A): Liquid ratio is considered more dependable than Current Ratio. Reason (R): Liquid Ratio is more dependable because it includes only those assets which can be easily and readily converted into cash. Inventory is not included in Liquid Assets because it may take a lot of time before it is converted into cash. In the context of the above statements, which one of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are true and (R) is the correct explanation of (A). Explanation: The Liquid (Quick) Ratio is more dependable than the Current Ratio since it only includes liquid assets such as cash, bank accounts, debts, and so on that can be swiftly changed into cash. Inventory is removed because it can take longer to sell and generate cash. As a result, both assertion and reason are true, and reason accurately explains assertion.

AChoose Your Answer