Which of the following statements is correct regarding the quick ratio?
A) The numerator for the quick ratio is current assets minus inventory minus accounts receivable.
B) The numerator for the quick ratio is current assets.
C) The quick ratio is also called the working capital ratio.
D) The quick ratio is a more conservative variation of the current ratio.

Question

Quizplus · Accepted Answer

The quick ratio, unlike the current ratio, excludes inventory and other less liquid current assets from the numerator, making it a more conservative measure of a company's liquidity. It focuses on the most liquid assets, providing a stricter view of a company's ability to meet short-term obligations.

Which of the Following Statements Is Correct Regarding the Quick