| Investing Lesson 3 |
| Quiz: How to Analyze a Balance Sheet |
Explanation of $32,000 Question
The quick ratio is defined in Part 13 as:
"The Quick Test Ratio (also called the Acid Test or Liquidity Ratio) is the most excessive and difficult test of a company's financial strength and liquidity. To calculate the quick ratio, take the current assets and subtract the inventory (current assets minus inventory is often referred to as the "quick assets"). What you are left with are the items that can be converted into cash immediately . Divide the result by the current liabilities. The answer is the Quick Test ratio."
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