The Rough "Rule of Thumb" for a Quick Ratio Is

question 22

Multiple Choice

The rough "rule of thumb" for a quick ratio is that the ratio should be about

• A) 2 to 1.
• B) 1 to 1.
• C) .1 to 1.
• D) 1 to .1.

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Definitions:

Compensating Balance

A minimum account balance that a company agrees to maintain in a bank account, often to qualify for favorable terms on a loan from the bank.

Effective Rate

The interest rate on a loan or investment, adjusted for the compounding period, providing a true reflection of financial costs or returns.

Terms of Sale

The conditions under which a seller is willing to sell a product or service, including price, payment method, and delivery time.

Prompt Payment Discount

A reduction in the amount due on a bill offered by a seller to encourage early payment by the buyer.