The Quick Ratio

question 5

Multiple Choice

The quick ratio:

• A) Indicates the ability of a firm to meet its current obligations without disposing of any inventory.
• B) Depicts the ability of a firm to pay off its long-term debts in a timely manner.
• C) Compares the current cash holdings of a firm to the current liabilities.
• D) Measures a firm's ability to generate cash from its operations.
• E) Indicates how quickly a firm can liquidate its inventory.

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Definitions:

Financial Statement

A document that presents a detailed financial status of a company, including balance sheets, income statements, and cash flow statements, at a specific point in time.

Normal Balance

The side (debit or credit) where the balance of an account usually increases.

Account Category

A classification within accounting used to group similar types of accounts, such as assets, liabilities, equity, revenue, and expenses.

Accounts Receivable Subsidiary Ledger

is a detailed ledger showing individual transactions and balances for customers who owe money to the business, supplementing the general ledger.