A company's quick ratio:
A) indicates the length of time the company takes to pay its short-term creditors.
B) indicates how quickly the company converts its current assets to cash.
C) is computed by dividing current assets by current liabilities, excluding accounts payable for inventory purchases.
D) can never be larger than its current ratio at the same date.

Question

Quizplus · Accepted Answer

The quick ratio is calculated by dividing liquid assets (excluding inventory) by current liabilities. Since the current ratio includes all current assets, the quick ratio can never be larger than the current ratio.

A Company's Quick Ratio