At 31 October 2021, Tasha Limited has inventory of £60,000, trade payables of £80,000, cash at the bank of £24,500, trade receivables of £88,000, cash in hand of £2,500 and current tax payable of £20,000. Tasha Limited also has a loan of £125,000 which is due for repayment by 5 equal annual instalments commencing on 30 September 2022. What is Tasha Limited's quick ratio?

Question

Quizplus · Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Current Assets excluding inventory are £24,500 (cash at bank) + £2,500 (cash in hand) + £88,000 (trade receivables) = £115,000. Current Liabilities are £80,000 (trade payables) + £20,000 (current tax payable) = £100,000. Quick ratio = £115,000 / £100,000 = 1.15:1. However, the correct calculation should consider the loan repayment within a year as a current liability, which was not included in the options. The closest option is C) 0.92:1, assuming a miscalculation in the provided options.

At 31 October 2021, Tasha Limited Has Inventory of £60,000