Series 79 practice questionmediumFinancial Statement Analysis
In assessing a company’s liquidity, which metric best reflects the speed at which it can convert assets into cash without loss?
- ACurrent ratio
- BDebt-to-equity ratio
- CGross margin
- DQuick ratio✓ Correct answer
Explanation
Why D — Quick ratio
The quick ratio excludes inventory and best reflects a firm's ability to quickly convert assets to cash. Using broader ratios may overstate true short-term liquidity.
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