CFA Level I · CFA Level I Exam · Analyzing Balance Sheets
A company reports cash of 120, marketable securities of 80, receivables of 200, inventory of 300 and current liabilities of 500 (all in € thousands). The quick ratio is closest to:
The quick ratio is 0.80. Quick assets are cash 120, marketable securities 80 and receivables 200, totaling 400, divided by current liabilities of 500. Inventory is excluded because it is less liquid. Including it would give the current ratio of 1.40.
- A0.40
- B0.80Correct
- C1.40
Explanation
Quick assets = 120 + 80 + 200 = 400. Quick ratio = 400 / 500 = 0.80. The 1.40 option is the current ratio (700/500), which wrongly includes inventory. The 0.40 option is the ratio of cash plus securities only (200/500).
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