In the context of ratio analysis, the quick ratio measures
A)the current assets of a firm, excluding its current inventory, relative to its current liabilities.
B)the total assets of a firm, including equity investments and accounts receivable.
C)the cash that can be quickly gained by selling a firm's current inventory at hugely discounted rates.
D)the overall profits of a firm measured across a fixed period of time.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid test ratio, is a measure of a company's ability to pay off its current liabilities with quick assets (current assets minus inventory) quickly. It excludes inventory because not all inventory may be easily sold or converted into cash. A higher quick ratio indicates a more liquid and financially stable company.

In the Context of Ratio Analysis, the Quick Ratio Measures