Select the incorrect statement regarding the quick ratio:
A)The quick ratio is also known as the acid-test ratio.
B)The quick ratio equals quick assets divided by total liabilities.
C)The quick ratio is a conservative variation of the current ratio.
D)The quick ratio ignores some current assets that are less liquid than others.

Question

Quizplus · Accepted Answer

The quick ratio is also known as the acid-test ratio. The formula is quick assets (cash, accounts receivable, and marketable securities)/current liabilities. This is a more conservative measure of liquidity because less liquid assets such as inventory and prepaid expenses are not included in the numerator.

Select the Incorrect Statement Regarding the Quick Ratio