Inventory and prepaid expenses are NOT included in the computation of the:
A)quick ratio.
B)current ratio.
C)debt ratio.
D)working capital ratio.

Question

Quizplus · Accepted Answer

The quick ratio only considers assets that can be easily converted into cash, such as cash, marketable securities, and accounts receivable. Inventory and prepaid expenses are not easily converted into cash, so they are excluded from the quick ratio computation. However, inventory and prepaid expenses are included in the computation of the current ratio, debt ratio, and working capital ratio.

Inventory and Prepaid Expenses Are NOT Included in the Computation