The Basic Difference Between the Quick Ratio and the Current

question 18

Multiple Choice

The basic difference between the quick ratio and the current ratio is that the _____.

• A)quick ratio measures liquidity while the current ratio measures profitability
• B)current ratio test is a more difficult one
• C)current ratio includes inventories and marketable securities
• D)current ratio measures only the most liquid assets

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Definitions:

U.S. Government Securities

Financial instruments issued by the United States Department of the Treasury to finance government spending and obligations, considered low-risk investments.

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, central bank, or other financial authority.

Actual Reserves

The total reserves held by a bank, consisting of both required reserves and any excess reserves not needed to meet central bank requirements.

Discount Rate

The Discount Rate is the interest rate set by central banks at which financial institutions can borrow reserves, influencing monetary policy and the money supply.