The Quick Ratio Differs from the Current Ratio in That

question 96

Multiple Choice

The quick ratio differs from the current ratio in that it

• A) represents the amount of cash on hand instead of the amount of working capital.
• B) is a stricter test of a company's ability to pay its current debts as they are due.
• C) excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible default on payment.
• D) is more difficult to calculate.

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Definitions:

Vertical Axis

In a graph or chart, the y-axis, which is typically used to measure the dependent variable or the value being investigated.

Price Level

A measure of the average of current prices across the entire spectrum of goods and services produced in the economy, often used to analyze inflation.

Classical Model

An economic theory that emphasizes the role of free markets in regulating economic activity and suggests that markets naturally move towards full employment.

Prices and Wages

The amount of money required to purchase goods and services, and the payments made to workers for their labor, respectively.