A Quick Ratio That Is Much Smaller Than the Current

question 160

Multiple Choice

A quick ratio that is much smaller than the current ratio indicates that

• A) inventories represent a large portion of current assets.
• B) the company has a low inventory turnover.
• C) inventories represent a small portion of current assets.
• D) the company has a high inventory turnover.

---

Definitions:

Debt Ratio

A financial ratio that measures the proportion of a company's assets that are financed by debt.

Assets

Economic resources owned or controlled by an individual or entity that are expected to produce value or benefit in the future.

EBIT

Earnings Before Interest and Taxes, a measure of a firm's profit that includes all expenses except interest and income tax expenses.

Interest

The charge for borrowing money or the return on invested capital, typically expressed as an annual percentage rate.