Question

which of the following is equal to cash and accounts receivable divided by current liabilities? current ratio inventory ratio quick ratio

Explanation:

The quick ratio (also known as acid - test ratio) is calculated as (Cash + Accounts Receivable+Short - term Investments)/Current Liabilities (in the case of only cash and accounts receivable, it is (Cash + Accounts Receivable)/Current Liabilities). The current ratio is (Current Assets)/Current Liabilities, and current assets include inventory. There is no standard "inventory ratio" defined as (cash + accounts receivable)/current liabilities. So the ratio of cash and accounts receivable divided by current liabilities is the quick ratio.

Answer:

C. quick ratio