The quick ratio provides
A)a better indicator than the current ratio of potential growth.
B)a ratio of revenues to net income.
C)a more restrictive view of a company's liquidity compared to the current ratio.
D)more incentive for a company to invest in non-liquid assets.
E)a company with liquidity levels compared to investment levels.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, provides a more restrictive view of a company's liquidity compared to the current ratio. This is because the quick ratio only considers the most liquid assets of a company, such as cash and accounts receivable, and excludes less liquid assets like inventory. As a result, the quick ratio is a more conservative measure of a company's ability to meet short-term obligations if they were to come due immediately.

The Quick Ratio Provides