In the Context of Ratio Analysis, the Quick Ratio Measures

question 37

Multiple Choice

In the context of ratio analysis, the quick ratio measures

• A)the current assets of a firm, excluding its current inventory, relative to its current liabilities.
• B)the total assets of a firm, including equity investments and accounts receivable.
• C)the cash that can be quickly gained by selling a firm's current inventory at hugely discounted rates.
• D)the overall profits of a firm measured across a fixed period of time.

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Definitions:

Fixed-Cost Fallacy

Consideration of costs that do not vary with the consequences of your decision (also known as the sunk-cost fallacy).

Depreciation Costs

The allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear and tear, age, or obsolescence.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to pursue a particular action.

Accounting Costs

Costs that appear on the financial statements of a company.