alleryStart learning →The quick ratio is more conservative than the current ratio because it leaves out:
AInsurance
BInvestors
CInstitutes
DInventory
Answer & Solution
Correct answer: D. Inventory
1. Not every current asset turns into cash quickly.
2. One of them has to be sold first before it becomes money.
3. The quick ratio does not include inventory.
4. That makes it a more conservative indication of liquidity.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 19 'The Importance of Trade Credit and Working Capital in Planning', sections 19.1-19.5_
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