Question

Quick assets (cash, short-term investments, and current receivables) divided by current liabilities is the: Multiple Choice Current liability turnover ratio. Working capital ratio. Current ratio.

Answer 1

The answer is quick ratio.

The current ratio contrasts the total current assets and liabilities of a business.

Analysts evaluate a company's liquidity using two categories from the balance sheet: current assets and quick assets.

The total of a company's cash and equivalents, marketable securities, and accounts receivable—all assets that represent or are readily convertible to cash are referred to as quick assets.

Since inventories are not included, quick assets are seen to be a more cautious indicator of a company's liquidity than current assets.

The quick ratio measures a company's capacity to pay its current liabilities immediately, without having to liquidate inventory or obtain financing.

Hence, Quick assets (cash, short-term investments, and current receivables) divided by current liabilities is the quick ratio.

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