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Class 12 Tuition > Learn Commerce > Why stock is excluded from liquid assets?
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Why stock is excluded from liquid assets?

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Stock is excluded from liquid assets because in calculation of liquid ration only those assets are considered which can be readily converted into cash within a period of 90 days. Stock cannot all the time be converted into cash immediately.
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Liquid assets are those assets which can easily converted into cash. While calculating liquid assets, accountants are of the opinion that stock are those assets that requires some time for its conversion into cash so it is therefore excluded while calculating the liquid assets.
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Commerce Enthusiast, Economics Lover, CA Aspirant

Stock is excluded from liquid assets because in calculation of liquid ration only those assets are considered which can be readily converted into cash within a period of 90 days. Stock cannot all the time be converted into cash immediately.
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Stock is excluded from liquid assets because in calculation of liquid ration only those assets are considered which can be readily converted into cash within a period of 90 days. Stock cannot all the time be converted into cash immediately.
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The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its current liabilities when they come due with only quick assets. Quick assets are current assets that can be converted to cash within 90 days or in the short-term. Cash, cash equivalents, short-term...
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The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay its current liabilities when they come due with only quick assets. Quick assets are current assets that can be converted to cash within 90 days or in the short-term.

Cash, cash equivalents, short-term investments or marketable securities, and current accounts receivable are considered quick assets.

Those current assets that are not readily convertible into cash are excluded from the calculation. Therefore, Stock expenses deferred tax credits are excluded since conversion of such assets into cash may take considerable time.

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