Given that a company has a healthy current ratio but a significantly lower quick ratio,which of the following may not be true?
A) The company may have an inventory problem.
B) The numerator of the quick ratio includes cash, marketable securities, and receivables.
C) The quick ratio is always smaller than the current ratio.
D) The company is rich in cash and receivables.

Question

Quizplus · Accepted Answer

A healthy current ratio with a significantly lower quick ratio suggests that a large portion of current assets is tied up in inventory, not cash or receivables.

Given That a Company Has a Healthy Current Ratio but a Significantly