The quick ratio
A)is generally larger than the current ratio.
B)decreases when a company's assets becomes more liquid.
C)increases when a company has more cash sales than credit sales.
D)is larger when a company's assets are more liquid.

Question

Quizplus · Accepted Answer

The quick ratio only includes the most liquid assets of a company (cash, marketable securities, and accounts receivable), which means a higher quick ratio indicates that the company's assets are more liquid. Therefore, option D is the correct answer. Option A is incorrect because the current ratio includes all current assets, whereas the quick ratio only includes the most liquid assets. Option B and C are also incorrect because they do not accurately reflect how the quick ratio is calculated.

The Quick Ratio