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:

Competitive Buyer

An individual or entity that purchases goods or services in a market where there is competition, aiming to obtain the best possible price and quality.

Marginal Expenditure

The additional cost incurred from producing or purchasing one more unit of a good or service.

Average Expenditure

The average amount of money spent per unit of time, often calculated for goods, services, or a combination of both by consumers or businesses.

Monopsonist

A market condition where there is only one buyer for a product or service, giving the buyer significant power over prices.