Question
The Quick Ratio (or Acid-Test Ratio) is a more stringent
measure of liquidity than the Current Ratio because it:Solution
The Quick Ratio is calculated as (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities. It excludes inventory because it is typically the least liquid current asset and may not be easily convertible to cash in the short term to meet immediate obligations. This makes it a more conservative test of short-term liquidity.
More Accounts Questions
- Which letter-cluster will replace the question mark (?) in the following series?
NPQR, OORQ, PNSP, ____, RLUN - Which letter-cluster will replace the question mark (?) in the following series?
RGV, UME, ?, AYW, DEF - A series is given with one term missing. Choose the correct alternatives from the given ones that will complete the series.
57, 59, 56, 61, 54, ___ - Which letter and number cluster will replace the question mark (?) to complete the given series?
LT6, KU12, IW24, FZ48, ____ - Select the number from among the given options that can replace the question mark (?) in the following series.
17, 18, 22, 31, 47, ___
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