The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Use original numerical questions with clear definitions and comparable units. Add a follow-up asking whether slow receivables alter the interpretation even when the arithmetic remains unchanged.
02 / UNDERSTANDING
The concept in context
Asset quality and timing can change the interpretation substantially. Old inventory may not sell at book value, and overdue receivables may arrive after creditors demand payment. Compare the business model, prior periods and collection cycle before judging strength. A universal target cannot replace the facts of a particular borrower.
03 / UNDERSTANDING
A worked learning case
Original educational case. A firm has current assets of ₹6 lakh, including inventory of ₹2 lakh, and current liabilities of ₹3 lakh. Its current ratio is 2:1. Using the stated simple definition, its quick ratio is 4:3, approximately 1.33:1. If most receivables are disputed, neither calculation alone proves that payments can be met on time.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Original practice: Current assets are ₹90,000, inventory ₹30,000 and current liabilities ₹30,000. Using the simple definition, what is the quick ratio?
Show the answer and reasoning
2:1.
Remove inventory of ₹30,000 from current assets of ₹90,000 to obtain quick assets of ₹60,000. Divide by current liabilities of ₹30,000. The result is 2:1, whereas the current ratio is 3:1. The exclusion changes the numerator; it does not reduce the liabilities in the denominator.
Two traps to watch for.
- Subtracting inventory from current liabilities instead of current assets.
- Treating a strong ratio as proof that receivables will be collected.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Write the numerator and denominator before calculating.
Compare current and quick ratios for one firm.
Add a collection-quality note beside every result.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/diploma-banking-finance
- www.ncert.nic.in https://www.ncert.nic.in/textbook/pdf/leac203.pdf
For DBF preparation, check the current official notice before relying on changing dates, rules or examination requirements.
