Asked by Hadeel Damra on May 23, 2024
Verified
Which of the following is the most desirable quick ratio?
A) 1.20
B) 1.00
C) 0.95
D) 0.50
Quick Ratio
A liquidity metric that measures a company's ability to cover its short-term obligations with its most liquid assets excluding inventory.
- Gain an understanding of how to calculate financial ratios and their meanings, particularly the quick ratio.
Verified Answer
HM
Hailey MagalhaesMay 25, 2024
Final Answer :
A
Explanation :
A quick ratio of 1.20 indicates that the company has sufficient current assets to cover its current liabilities, including inventory. This is generally considered a strong quick ratio and indicates that the company is in good financial health. A quick ratio of 1.00 or higher is generally desirable. Choices B, C, and D all have lower quick ratios, indicating that the company may struggle to meet its short-term obligations.
Learning Objectives
- Gain an understanding of how to calculate financial ratios and their meanings, particularly the quick ratio.