Business FinancesQuestion 498 of 690
When is the quick ratio more meaningful than the current ratio for a construction company?
a.When the company carries no inventory or work-in-progress
b.When evaluating long-term solvency over multiple years
c.When a large portion of current assets is tied up in slow-moving materials or unbilled WIP
d.When the company is profitable and growing quickly
Explanation
The quick ratio excludes inventory and other less-liquid current assets. It is more meaningful when a contractor's balance sheet is loaded with materials inventory or work-in-progress that cannot be converted to cash on short notice to pay bills.
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