A firm has a higher quick (or acid test) ratio than the industry average, which implies
A) the firm has a higher P/E ratio than other firms in the industry.
B) the firm is more likely to avoid insolvency in the short run than other firms in the industry.
C) the firm may be less profitable than other firms in the industry.
D) the firm has a higher P/E ratio than other firms in the industry, and the firm is more likely to avoid insolvency in the short run than other firms in the industry.
E) the firm is more likely to avoid insolvency in the short run than other firms in the industry, and the firm may be less profitable than other firms in the industry.

Question

Quizplus · Accepted Answer

Current assets earn less than fixed assets; thus, a firm with a relatively high level of current assets may be less profitable than other firms. However, its high level of current assets makes it more liquid.

A Firm Has a Higher Quick (Or Acid Test) Ratio