The Quick Ratio Is Considered More Useful Than the Current

question 22

Multiple Choice

The quick ratio is considered more useful than the current ratio for:

• A) Evaluating the profitability of a business that sells inventory very quickly, such as a restaurant.
• B) Evaluating the solvency of a business that turns inventory into cash very slowly, such as a shipbuilder.
• C) Evaluating long-term credit risk.
• D) Evaluating investors' expectations concerning future earnings.

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Definitions:

Pay Off

To completely settle a debt or obligation, typically referring to the full repayment of a loan or financial liability.

Economic Value

The worth of a good or service determined by the benefits it provides to the consumer, often reflected in its price on the market.

Series of Payments

Multiple payments made over time, often at fixed intervals.

Combined Equivalent Value

Refers to a singular value that encapsulates the total worth or effect of multiple financial elements combined.