The Quick Ratio Differs from the Current Ratio in the Following

question 10

Multiple Choice

The quick ratio differs from the current ratio in the following way:

• A)The current ratio is a more conservative estimate of liquidity compared to the quick ratio
• B)The quick ratio excludes both notes payable and bank loans, while the current ratio excludes only notes payable
• C)The quick ratio excludes inventory and prepaid expenses while the current ratio includes all current assets
• D)The quick ratio is generally higher than a firm's current ratio

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Definitions:

Profit or Loss

The financial result of an entity's operations and transactions, representing earnings exceeding costs or losses.

Derivative Security

A financial instrument whose value is dependent on the value of an underlying asset, such as options or futures.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends and/or capital appreciation.

Call Option

The right, but not the obligation, to buy an underlying asset at a specified strike price within a specified time frame.