Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large,slow-moving:
A)Plant and equipment.
B)Receivables.
C)Inventories.
D)Employees.

Question

Quizplus · Accepted Answer

The quick ratio only takes into account the company's most liquid assets (cash and accounts receivable) compared to its current liabilities. Short-term creditors are most interested in a company's ability to pay off its debts in the short-term, and large, slow-moving inventories could potentially hinder a company's ability to do so. Therefore, using the quick ratio gives a more accurate picture of a company's short-term solvency.

Short-Term Creditors Are Most Likely to Use the Quick Ratio