The quick ratio is used to determine the efficiency with which a company uses its assets.

• A. True
• B. False
• C. Depends on industry
• D. Only with inventory included

Answer: (B)

False. The quick ratio is a liquidity measure, not a test of how efficiently a company uses its assets. It assesses whether a business can cover its current liabilities with its most liquid assets (cash, marketable securities, and accounts receivable) and excludes inventory because it isn’t as readily converted to cash. Asset efficiency is evaluated with turnover metrics like asset turnover, receivables turnover, or inventory turnover, or with return on assets. While industry norms can influence benchmark levels, the quick ratio’s purpose remains to gauge short-term solvency, not efficiency. Including inventory would blur this measure’s focus.