Which item is excluded from the quick ratio calculation?

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Multiple Choice

Which item is excluded from the quick ratio calculation?

Explanation:
The quick ratio measures liquidity by focusing on assets that can be quickly turned into cash to cover short-term obligations. Inventory is not included because it may not be sold promptly or at a reliable price, making it a less dependable source of cash in the near term. Quick assets—cash, marketable securities, and accounts receivable—are considered readily convertible to cash and are used in the numerator. Therefore, the item not included in the quick ratio calculation is inventory.

The quick ratio measures liquidity by focusing on assets that can be quickly turned into cash to cover short-term obligations. Inventory is not included because it may not be sold promptly or at a reliable price, making it a less dependable source of cash in the near term. Quick assets—cash, marketable securities, and accounts receivable—are considered readily convertible to cash and are used in the numerator. Therefore, the item not included in the quick ratio calculation is inventory.

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