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Cash operating expenditure of Rs. 1,82,500 has been projected for a company with Rs. 40,000 quick assets. Determine the defensive interval ratio. |
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Answer» Projected Daily Cash Requirement = 1,82,500 / number of days in a year = (1,82,500 / 365) = Rs. 500 Defensive Interval Ratio = Quick Assets / Projected Daily Cash Requirement = (40,000 / 500) = 80 days A high defensive interval ratio indicates safety of short term liquidity, thus the quick assets in this case are sufficient to meet operating expenses for 80 days. |
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