The Quick Ratio Differs from the Current Ratio in That

question 46

Multiple Choice

The quick ratio differs from the current ratio in that it

• A)represents the amount of cash on hand instead of the total current assets.
• B)excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible collection problems.
• C)is a stricter measure of a company's ability to pay its current obligations.
• D)signals the need to liquidate short-term investments when it drops below 2.0.

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Definitions:

Demand Curve

The Demand Curve is a graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers, typically downward sloping.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good that suppliers are willing to produce and sell.

Y Axis

The vertical line in a graph or chart that typically represents the dependent variable.

Equilibrium Price

The point where the volume of goods being offered equals the volume of goods being sought in terms of price.