Business FinancesQuestion 1142 of 1632
A quick ratio (acid-test) differs from the current ratio because the quick ratio:
a.Includes long-term debt
b.Divides by revenue instead of liabilities
c.Adds back depreciation
d.Excludes inventory from current assets
Explanation
The quick ratio removes inventory (and other less-liquid items) from current assets before dividing by current liabilities, giving a stricter measure of the ability to pay short-term debts with the most liquid assets. Construction inventory can be slow to convert to cash.
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