Question

if a business has $10,000 in cash, $5,000 in accounts receivable, and $3,000 in current liabilities, what is its quick ratio?
3
7
5

Explanation:

Step1: Recall the quick ratio formula

The quick ratio is calculated as $\frac{\text{Cash} + \text{Accounts Receivable}}{\text{Current Liabilities}}$.

Step2: Identify the values

Cash = $10,000, Accounts Receivable = $5,000, Current Liabilities = $3,000.

Step3: Calculate the numerator

Sum of cash and accounts receivable: $10,000 + $5,000 = $15,000.

Step4: Calculate the quick ratio

Divide the numerator by current liabilities: $\frac{15,000}{3,000} = 5$.

Answer:

5