Which of the following statement is correct regarding the quick ratio?
A)The numerator for the quick ratio is current assets.
B)The quick ratio is a less conservative variation of the current ratio.
C)The quick ratio is also called the working capital ratio.
D)The numerator for the quick ratio is current assets minus inventory minus prepaid expenses.

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, is a more conservative measure of liquidity than the current ratio because it excludes inventory and prepaid expenses from current assets. The formula for the quick ratio is (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities. Therefore, option D is correct as it states the correct numerator for the quick ratio. Options A, B, and C are incorrect statements.

Which of the Following Statement Is Correct Regarding the Quick