In Which of the Following Ways Does the Quick Ratio

question 67

Multiple Choice

In which of the following ways does the quick ratio differ from the current ratio?

• A) The quick ratio represents the amount of cash on hand instead of the total current assets.
• B) The quick ratio excludes inventories and accounts receivable from the numerator of the fraction.
• C) The quick ratio more strictly measures a company's ability to pay its current obligations.
• D) The quick ratio signals the need to liquidate short-term investments when it drops below 2.0.

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Definitions:

Adequacy of Consideration

A legal principle that examines whether the value exchanged in a contract is fair and reasonable to all parties involved.

Contract Formation

The process by which parties agree on the terms of a contract, leading to a binding agreement; typically involves offer, acceptance, consideration, and mutual intent.

Past Consideration

A concept in contract law that refers to a benefit or act that has already been given or performed before the promise is made, which is not valid consideration for a current contract.

Bilateral Contract

An agreement involving two parties where each promises to perform an act in exchange for the other's act.