Final answer:
The quick ratio includes cash, current investments, and accounts receivable in the numerator. Inventory is excluded because it is not as liquid as the other assets. The quick ratio is used to assess a company's ability to cover short-term obligations with its most liquid assets.
Step-by-step explanation:
The quick ratio, also known as the acid-test ratio, is a measure used in finance to evaluate a company's short-term liquidity position. This ratio is designed to show how well a company can meet its short-term obligations with its most liquid assets. The quick ratio is calculated by taking the sum of a company's cash, current investments (also known as marketable securities), and accounts receivable and dividing by its current liabilities.
Inventory is typically excluded from the quick ratio because it is not considered as liquid as cash, accounts receivable, and marketable securities; it may take time to convert inventory into cash. Therefore, the correct items included in the numerator of the quick ratio are:
- Cash
- Current Investments
- Accounts Receivable