Which asset is excluded by the quick ratio that is included in the current ratio?

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Multiple Choice

Which asset is excluded by the quick ratio that is included in the current ratio?

The essential idea is liquidity: the current ratio uses all current assets, while the quick ratio uses only the most liquid assets. Inventory sits in the current ratio because it can be turned into cash, but not as quickly as cash, marketable securities, or accounts receivable. The quick ratio excludes inventory for this reason, focusing only on assets that are readily convertible to cash in the near term. Therefore, the asset that is included in the current ratio but excluded by the quick ratio is inventory. (Cash and accounts receivable are included in both ratios, while prepaid expenses are generally not counted in the quick ratio.)

Which asset is excluded by the quick ratio that is included in the current ratio?

Prepare for the Amber Book Practice Management Test with engaging multiple choice questions, detailed explanations, and study guides. Sharpen your skills and boost your confidence for the PcM exam. Get ready to ace your test!

Which asset is excluded by the quick ratio that is included in the current ratio?

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