The Quick Ratio

question 115

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:

Money Market

A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.

Interest Rate Risk

The potential for investment losses due to changes in interest rates.

Marketable Securities Portfolio

This refers to a collection of liquid financial instruments that a company or individual holds, which can be quickly sold in the market to raise cash.