What does the Quick ratio tell the NHA?

What does the Quick ratio tell the NHA?

• A. Calculates depreciation
• B. Indicates long-term profitability
• C. Identifies assets that can be sold immediately to raise money
• D. Measures inventory turnover

Answer: (C)

The quick ratio focuses on short-term liquidity by looking at the most liquid assets that can be converted to cash quickly to cover current liabilities. It uses cash, marketable securities, and accounts receivable, and purposefully excludes inventory because inventory isn’t considered readily convertible to cash in the near term. So it tells the NHA how much cash or near-cash assets are available to raise funds immediately to meet obligations. That’s why identifying assets that can be sold promptly to raise money is the best fit. It’s not about depreciation, long-term profitability, or how fast inventory turns—those are separate concepts.

The quick ratio focuses on short-term liquidity by looking at the most liquid assets that can be converted to cash quickly to cover current liabilities. It uses cash, marketable securities, and accounts receivable, and purposefully excludes inventory because inventory isn’t considered readily convertible to cash in the near term. So it tells the NHA how much cash or near-cash assets are available to raise funds immediately to meet obligations.

That’s why identifying assets that can be sold promptly to raise money is the best fit. It’s not about depreciation, long-term profitability, or how fast inventory turns—those are separate concepts.