The quick ratio
A) does not include inventory as part of the numerator.
B) does not include all current liabilities in the calculation.
C) is a quick calculation of an approximation of the current ratio.
D) includes prepaid expenses as part of the numerator.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid test ratio, is a financial metric that measures a company's ability to pay off its current liabilities quickly. It is calculated by dividing a company's current assets by its current liabilities, excluding inventory from the assets. This is because inventory may not be easily converted into cash and therefore may not be readily available to pay off the company's debts in the short term.

The Quick Ratio