The quick ratio:
A) Indicates the ability of a firm to meet its current obligations without disposing of any inventory.
B) Depicts the ability of a firm to pay off its long-term debts in a timely manner.
C) Compares the current cash holdings of a firm to the current liabilities.
D) Measures a firm's ability to generate cash from its operations.
E) Indicates how quickly a firm can liquidate its inventory.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory. It is a more stringent measure than the current ratio because it does not include inventory, which may not be as quickly convertible to cash.

The Quick Ratio