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JZ240 JZ240
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2 months ago
Which of the following ratio is considered to be a better indicator of a firm's ability to pay creditor because it leaves out inventories?

▸ Accounts receivable turnover ratio

▸ Inventory turnover ratio

▸ Quick ratio

▸ Debt-to-equity ratio

▸ Equity-to-debt ratio
Textbook 

Business in Action


Edition: 9th
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bodie1980bodie1980
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Quick ratio

Quick ratio is a measure of a firm's short-term liquidity. It is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. This ratio is often a better indicator of a firm's ability to pay creditors than the current ratio because the quick ratio leaves out inventories, which can take a long time to convert to cash.

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