Which asset is included in the current ratio but not in the quick ratio?

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Multiple Choice

Which asset is included in the current ratio but not in the quick ratio?

Explanation:
The key idea is liquidity and how we measure it with two ratios. The current ratio uses all current assets, so it counts inventory alongside cash and receivables. The quick ratio, however, excludes inventory because it’s not as readily turned into cash in the near term. This makes inventory the asset that appears in the current ratio but not in the quick ratio. Accounts receivable are considered fairly liquid and are included in the quick ratio, while fixed assets and long-term investments are not current assets, so they don’t appear in either ratio's current-assets numerator.

The key idea is liquidity and how we measure it with two ratios. The current ratio uses all current assets, so it counts inventory alongside cash and receivables. The quick ratio, however, excludes inventory because it’s not as readily turned into cash in the near term. This makes inventory the asset that appears in the current ratio but not in the quick ratio.

Accounts receivable are considered fairly liquid and are included in the quick ratio, while fixed assets and long-term investments are not current assets, so they don’t appear in either ratio's current-assets numerator.

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