Question

why is inventory excluded from the quick ratio calculation?
it is too liquid.
it is insignificant.
it is not liquid enough.

Explanation:

The quick ratio measures a company's ability to meet short - term obligations with its most liquid assets. Inventory is excluded because it is not liquid enough. Converting inventory into cash often takes time (e.g., through sales, which may have their own timelines and uncertainties like finding buyers, fulfilling orders, etc.), unlike more liquid assets such as cash, accounts receivable, or marketable securities. The option "It is too liquid" is incorrect as inventory is not highly liquid. The option "It is insignificant" is also incorrect as inventory can be a significant asset for many businesses.

Answer:

C. It is not liquid enough. (assuming the options are labeled A, B, C with A: It is too liquid, B: It is insignificant, C: It is not liquid enough)