💼 Pre-MBA Exam Prep

The quick ratio excludes which current asset from the current ratio calculation?

A Cash
B Inventory, because it may not be quickly convertible to cash
C Accounts receivable
D Prepaid expenses only

✓ Correct Answer: Option B

Quick ratio (acid test) = (Current Assets - Inventory) / Current Liabilities. Excluded inventory: least liquid current asset, may be obsolete or hard to sell quickly. More conservative than current ratio.

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