The most important difference between the 'quick' and 'current' ratios in assessing an entity's short-term debt-paying ability is the inclusion of:
A) cash at bank in one and not the other.
B) inventory in one and not the other.
C) current receivables in one and not the other.
D) prepayments in one and not the other.

Question

Quizplus · Accepted Answer

The quick ratio only includes the most liquid assets such as cash, marketable securities, and accounts receivable, while excluding inventory. The current ratio includes all current assets including inventory, making it a less reliable indicator of an entity's ability to pay off short-term debts.

The Most Important Difference Between the 'Quick' and 'Current' Ratios