Question

Which item belongs in the numerator of the current ratio but not the quick ratio?

1) Inventory
2) Accounts Receivable
3) Prepaid Expenses
4) Accounts Payable

Answer 1

Accounts Payable belongs in the numerator of the current ratio but not the quick ratio.

Step-by-step explanation:

Accounts Payable belongs in the numerator of the current ratio but not the quick ratio.

The current ratio is calculated by dividing current assets by current liabilities.

Current assets include inventory, accounts receivable, and prepaid expenses.

Accounts payable is not included in the calculation of the current ratio.

On the other hand, the quick ratio, also known as the acid-test ratio, is calculated by excluding inventory from the current assets.

Therefore, only accounts receivable and prepaid expenses are included in the numerator of the quick ratio.