Series 79 practice questioneasyLiquidity Ratios
A company has current assets of $400,000, inventory of $100,000, and current liabilities of $200,000. What is its quick ratio?
- A1.5✓ Correct answer
- B2.0
- C1.0
- D1.25
Explanation
Why A — 1.5
The quick ratio is (Current Assets - Inventory) / Current Liabilities = ($400,000 - $100,000) / $200,000 = $300,000/$200,000 = 1.5. The current ratio uses all current assets, not excluding inventory, so B is incorrect. C and D reflect miscalculations.
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