The basic difference between the quick ratio and the current ratio is that the ________.
A) quick ratio assumes that marketable securities can be quickly converted to cash
B) quick ratio is a more severe test
C) quick ratio assumes that inventories can be quickly converted to cash
D) current ratio measures only the most liquid assets

Question

Quizplus · Accepted Answer

The quick ratio is a more severe test because it excludes inventories from the calculation, assuming that they cannot be quickly converted to cash. The current ratio includes all current assets, including inventories. The assumption about marketable securities is true for both ratios. The current ratio measures a broader range of assets than just the most liquid ones.

The Basic Difference Between the Quick Ratio and the Current