The Quick Ratio Differs from the Current Ratio

question 41

Multiple Choice

The quick ratio differs from the current ratio:

• A)Because it excludes short-term investments.
• B)Because liabilities are divided by current assets.
• C)Because it measures profitability.
• D)Because prepaid expenses and inventory are excluded.
• E)Because prepaid expenses and inventory are excluded and because it measures profitability.

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Definitions:

Financial Reporting

The method by which declarations are created to reveal the financial condition of an organization to its managers, investors, and governmental bodies.

External Auditor

An independent third-party professional who examines the financial statements of a company to provide an opinion on their accuracy and compliance with accounting standards.

Cost-Plus Contracts

Agreements where a contractor is paid for all construction-related expenses plus a contracted profit.

Profit Markup

The amount added to the cost price of goods to cover overhead and profit; a measure of the profit margin.