CFA Practice Question

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CFA Practice Question

The quick ratio ______

I. is a measure of short-term debt-paying ability.
II. calculation includes inventory.
III. is used to evaluate profitability.
Correct Answer: I only

The quick ratio is used to evaluate liquidity. Only current assets that can be quickly converted to cash are included in the quick ratio, so inventory is not included in the calculation.

User Contributed Comments 2

User Comment
fabsan The denominator of the Quick ratio is = Tot Short Term Liabilities (not the debt).
maryprz14 It is a measure of short-term liability paying ability, not debt. Debt is long term and bears interest, short-term liability does not bear interest so is not DEBT.
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