Which of the following items should be excluded from the assets or liabilities when computing the quick ratio?
A)inventories
B)amount of long-term debt due in the following year
C)accounts payable
D)cash equivalents

Question

Quizplus · Accepted Answer

The quick ratio (also known as acid-test ratio) is used to determine a company's ability to meet short-term obligations with liquid assets. Liquid assets are considered to be assets that can be easily converted into cash, such as cash equivalents and marketable securities. Inventories are not considered liquid assets since they may take time to be converted into cash. Therefore, inventories should be excluded from the assets when computing the quick ratio. The other options (B, C, and D) are all considered to be part of the quick ratio calculation as they represent either current liabilities or liquid assets.

Which of the Following Items Should Be Excluded from the Assets