Bettina has just calculated her company's current ratio. To calculate the quick ratio, she should ________.
A)subtract current liabilities from current assets before dividing by total liabilities
B)subtract total liabilities from current assets before dividing by current liabilities
C)subtract inventory from current assets before dividing by current liabilities
D)subtract depreciation expense from current assets before dividing by current liabilities

Question

Quizplus · Accepted Answer

To calculate the quick ratio, also known as the acid-test ratio, the numerator consists of only quick assets, which excludes inventory. Therefore, the inventory is subtracted from current assets before dividing by current liabilities. The quick ratio formula is:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities.

Bettina Has Just Calculated Her Company's Current Ratio