Asked by Elena Franco on May 13, 2024
Verified
Which of the following is not included in the computation of the quick ratio?
A) inventory
B) marketable securities
C) accounts receivable
D) cash
Quick Ratio
A liquidity indicator that measures a company's ability to meet its short-term obligations with its most liquid assets.
Marketable Securities
Financial instruments that can be easily converted to cash, typically within one year, such as stocks or bonds.
Inventory
The raw materials, work-in-progress products, and finished goods that are considered to be part of a business's assets that are ready or will be ready for sale.
- Separate and understand the distinctiveness of liquidity ratios, notably the current and quick ratios, and grasp their essential significance.
Verified Answer
JG
jonathan GonzalezMay 16, 2024
Final Answer :
A
Explanation :
The quick ratio, also known as the acid-test ratio, is a measure of a company's liquidity and ability to meet short-term obligations. It is calculated by subtracting inventory from current assets and dividing the result by current liabilities. Since inventory is not considered a highly liquid asset, it is not included in the calculation of the quick ratio. Marketable securities, accounts receivable, and cash are typically included in the calculation.
Learning Objectives
- Separate and understand the distinctiveness of liquidity ratios, notably the current and quick ratios, and grasp their essential significance.