The quick ratio is calculated as
A)current assets divided by current liabilities.
B)current assets minus inventory,divided by current liabilities.
C)net working capital divided by current liabilities.
D)cash on hand divided by current liabilities.
E)current liabilities divided by current assets.

Question

Quizplus · Accepted Answer

The quick ratio, also called the acid-test ratio, is a measure of a company's ability to meet its short-term obligations with its most liquid assets. It excludes inventory from current assets since inventory may not be easily converted into cash in the short term. The formula for the quick ratio is (Current Assets - Inventory) / Current Liabilities. Therefore, the correct answer is B, current assets minus inventory divided by current liabilities.

The Quick Ratio Is Calculated as