Why Is the Quick Ratio Considered by Some to Be

question 38

Multiple Choice

Why is the quick ratio considered by some to be a better measure of liquidity than the current ratio?

• A) The quick ratio more accurately reflects a firm's profitability.
• B) It omits the least liquid current asset from the numerator of the ratio.
• C) The current ratio does not include accounts receivable.
• D) It measures how "quickly" cash flows through the firm.

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Definitions:

Extinction

In psychology, the gradual weakening and disappearance of a conditioned response behavior.

Paired

Describes objects or concepts that are linked or associated with each other in some relationship or function.

Conditioned Stimulus

A formerly neutral signal that, when linked with the unconditioned stimulus, ultimately elicits a conditioned reaction.

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without prior learning or conditioning.