[amp_mcq option1=”The current ratio” option2=”The quick ratio” option3=”The receivable-turnover ratio” option4=”The inventory-turnover ratio” correct=”option2″]<\/p>\n
The correct answer is B. The quick ratio.<\/p>\n
The quick ratio is a liquidity ratio that measures a company’s ability to pay off its short-term obligations with its most liquid assets. It is calculated by dividing a company’s current assets minus its inventory by its current liabilities.<\/p>\n
The quick ratio is a more accurate guide to liquidity than the current ratio because it excludes inventory from the calculation. Inventory is a less liquid asset than current assets such as cash, accounts receivable, and short-term investments. This is because inventory can take time to sell and convert into cash.<\/p>\n
The quick ratio is a useful tool for creditors and investors to assess a company’s ability to meet its short-term obligations. A high quick ratio indicates that a company has a good liquidity position and is likely to be able to pay its short-term debts. A low quick ratio indicates that a company may have difficulty meeting its short-term obligations.<\/p>\n
The receivable-turnover ratio and the inventory-turnover ratio are also liquidity ratios, but they are not as accurate as the quick ratio. The receivable-turnover ratio measures how quickly a company collects its accounts receivable. The inventory-turnover ratio measures how quickly a company sells its inventory. Both of these ratios can be affected by factors such as the industry in which a company operates and the company’s credit policies.<\/p>\n
Therefore, the quick ratio is the more accurate guide to liquidity of a firm.<\/p>\n","protected":false},"excerpt":{"rendered":"
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