Which of the following statements is true about the quick ratio?
A) The quick ratio does not include inventory as part of the numerator.
B) The quick ratio does not include accounts payable in the denominator.
C) The quick ratio is an approximation of the debt ratio.
D) The quick ratio reflects the dividends paid by a company.

Question

Quizplus · Accepted Answer

The quick ratio is a measure of a company's ability to meet its short-term obligations using its most liquid assets, excluding inventory. Therefore, statement A is true. Statement B is false because accounts payable are included in the quick ratio formula as part of the denominator. Statement C is false because the quick ratio is a measure of liquidity, not debt. Statement D is false because the quick ratio does not reflect dividends paid by a company.

Which of the Following Statements Is True About the Quick