The correct answer is: C. Current Assets less Inventories
Liquid assets are assets that can be quickly converted into cash without significant loss of value. They include cash, cash equivalents, short-term investments, and accounts receivable. Inventories are not considered liquid assets because they are not readily convertible into cash.
Here is a brief explanation of each option:
- A. Value of all current assets
This option is incorrect because it includes all current assets, even those that are not liquid. For example, inventories are current assets, but they are not liquid.
- B. Sum of cash and Bank Balances
This option is incorrect because it includes only cash and bank balances, which are a subset of liquid assets. Other liquid assets include short-term investments and accounts receivable.
- C. Current Assets less Inventories
This option is correct because it includes all liquid assets, except for inventories.
- D. Current Assets less Inventories and Prepaid Expenses
This option is incorrect because it includes prepaid expenses, which are not liquid assets. Prepaid expenses are assets that have been paid for in advance, but have not yet been used. They are not readily convertible into cash.