The quick ratio measures the relationship between:

A) current assets and current liabilities
B) current assets and equity
C) very liquid current assets and current liabilities
D) very liquid current assets and equity

Question

The quick ratio measures the relationship between:

A) current assets and current liabilities
B) current assets and equity
C) very liquid current assets and current liabilities
D) very liquid current assets and equity

Quizplus · Accepted Answer

As not all assets have immediate liquidity value,the current ratio can overstate the liquidity of a company.An alternative ratio is the quick ratio,which only examines very liquid current assets relative to current liabilities.The quick ratio is typically computed as: quick ratio = (cash + marketable securities + receivables)/current liabilities.

The Quick Ratio Measures the Relationship Between