The quick ratio
A) is used to quickly determine a company's leverage and long-term debt-paying ability.
B) relates cash, marketable securities, and net receivables to current liabilities.
C) is calculated by taking one item from the income statement and one item from the balance sheet.
D) is the same as the current ratio except it is rounded to the nearest whole percent.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, relates a company's cash, marketable securities, and net receivables to its current liabilities. This provides insight into a company's ability to meet its short-term obligations without relying on inventory or other less-liquid assets. Option A is incorrect as it refers to the debt-to-equity ratio, which measures a company's long-term debt-paying ability. Option C is incorrect as it is vague and does not accurately describe the calculation of the quick ratio. Option D is incorrect as it suggests that the quick ratio is rounded to the nearest whole percent, which is not true.

The Quick Ratio