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Cash is $373,000, marketable securities $248,000, accounts receivable $108,000, inventory $55,000, prepaid insurance $127,000, and current liabilities $364,000. What is the quick ratio (to one decimal)?
A2.0
B2.5
C1.7
D1.0
Answer & Solution
Correct answer: A. 2.0
1. Quick assets = cash + marketable securities + receivables = $373,000 + $248,000 + $108,000 = $729,000.
2. Quick ratio = quick assets / current liabilities = $729,000 / $364,000.
3. = 2.0.
4. Trap: 2.5 (option B) wrongly includes inventory and prepaid items, giving the current ratio.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.3.4 "Quick Ratio", p.295_
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