The formula to calculate quick ratio is:

Question

Options

• AQuick ratio = (Credit + Securities + Receivables) / Current liabilities
• BQuick ratio = (Cash + Securities + Payables) / Final liabilities
• CQuick ratio = (Credit + Securities + Payables) / Final liabilities
• DQuick ratio = (Cash + Securities + Receivables) / Current liabilities

• A
  8% (3)
• B
  3% (1)
• C
  10% (4)
• D
  80% (32)

Explanation

Option D is correct because the quick ratio measures a company's ability to meet short-term obligations using only its most liquid assets - cash, marketable securities, and receivables (amounts owed to the company) - divided by current liabilities (debts due within one year).

• A is wrong because it uses "Credit" instead of "Cash" - credit is not a liquid asset you hold; cash is.
• B is wrong on two counts: "Payables" (money you owe) should be "Receivables" (money owed to you), and "Final liabilities" is not a real financial term - it should be "Current liabilities."
• C is wrong for the same two reasons as B: "Credit" instead of "Cash" and "Payables/Final liabilities" instead of "Receivables/Current liabilities."

Memory tip: Think of the quick ratio as your "emergency wallet" - what can you grab right now (Cash + Securities + Receivables) to pay bills due soon (Current liabilities)? The word "quick" signals speed and immediacy, so everything in the formula must be fast to access and short-term.

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