Final answer:
The assertion that the quick ratio subtracts accounts receivable is false. The quick ratio actually includes accounts receivable along with cash and marketable securities, divided by current liabilities, to assess a company's immediate liquidity position.
Step-by-step explanation:
The statement that the quick ratio subtracts accounts receivable in its numerator is false. The quick ratio, also known as the acid-test ratio, is a measure of a company's immediate liquidity position. It calculates by taking the most liquid assets that can be quickly converted into cash—excluding inventory and prepayments—and dividing them by the current liabilities. The formula for the quick ratio is:
Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
Hence, rather than subtracting, accounts receivable is included in the calculation. Inventory and prepaid expenses are excluded from this calculation because they cannot be easily converted into cash.