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Why inventory is excluded from liquid assets?

  • Post category:Accountancy
  • Reading time:1 mins read

SOLUTION

Inventory is excluded from liquid assets because:
(i) there is uncertainty whether it will be sold or not and at what price it will be sold; (ii) it will take time before it is converted into trade receivables and cash.


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Previous PostState one transaction which results in an increase in ‘Liquid Ratio’ and no change in ‘Current Ratio’.
Next PostWhy prepaid expenses are considered as Current assets?

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