Final Answer:
In the numerator of the current ratio, both accounts receivable and inventory are included. However, in the numerator of the quick or acid-test ratio, inventory is excluded as it is less liquid. The correct answer is 4) Accounts payable
Step-by-step explanation:
The current ratio and the quick ratio (or acid-test ratio) are financial metrics used to assess a company's short-term liquidity and ability to meet its short-term obligations. Let's break down each option:
Accounts receivable: Included in both the numerator of the current ratio and the quick ratio. They represent short-term assets expected to be converted into cash.
Inventory: Included in the numerator of the current ratio but excluded from the numerator of the quick ratio. Inventory is excluded from the quick ratio because it may take time to convert into cash and may not be as liquid in certain situations.
Prepaid expenses: Included in both ratios as they represent assets that will be used in the short term.
Accounts payable: Excluded from both ratios. Accounts payable are short-term liabilities and do not factor into the liquidity metrics of the company.
In summary, the correct answer is 4) Accounts payable as it is not included in the numerator for either the current ratio or the quick ratio.