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:

Accrued Interest

Interest that has accumulated on a bond since the last interest payment was made but has not yet been paid to the bondholder.

Quote Sheet

A document or digital view listing the price quotes for various financial instruments or commodities, often used in trading.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the company's equity, usually at the discretion of the bondholder.

Market Conversion Value

The current market value of a convertible security if it were converted into the underlying shares of stock today.