Question

Which of the following is not included in the computation of the quick ratio? a. Accounts receivable b. Marketable securities c. Cash inventory

Answer 1

Answer:

D) Inventory

Explanation:

In calculating the quick ratio only the most liquid assets of the firm are relevant.

The quick ratio is calculated as follows,

Quick ratio

= Cash + Marketable securities + Accounts receivables / Current Liabilities

Non-Liquid assets like the inventory that may take longer to liquidate depending on the market are not included as this ratio measures the emergency ability of a company to pay back its current liabilities.

Hope that helps