A is corrent. The requirement is to calculate the quick ratio. The quick ratio is calculated by dividing quick assets by current liabilities. Quick assets are those current assets that can be quickly converted to cash. Because inventory and prepaid rent are not quickly converted to cash, they are not classified as quick assets. Cash, net accounts receivable, and short-term marketable securities are the quick assets in this case. Therefore, this answer is correct because the quick ratio is equal to 0.81 to 1 [($60 + $180 - $8 + $90)/$400].
B is incorrect. The quick ratio is calculated by dividing quick assets by current liabilities. Quick assets are those current assets that can be quickly converted to cash. Because inventory and prepaid rent are not quickly converted to cash, they are not classified as quick assets. Cash, net accounts receivable, and short-term marketable securities are the quick assets in this case. Therefore, this answer is incorrect because the quick ratio is equal to 0.81 to 1 [($60 + $180 - $8 + $90)/$400].
C is incorrect. The quick ratio is calculated by dividing quick assets by current liabilities. Quick assets are those current assets that can be quickly converted to cash. Because inventory and prepaid rent are not quickly converted to cash, they are not classified as quick assets. Cash, net accounts receivable, and short-term marketable securities are the quick assets in this case. Therefore, this answer is incorrect because the quick ratio is equal to 0.81 to 1 [($60 + $180 - $8 + $90)/$400].
D is incorrect. The quick ratio is calculated by dividing quick assets by current liabilities. Quick assets are those current assets that can be quickly converted to cash. Because inventory and prepaid rent are not quickly converted to cash, they are not classified as quick assets. Cash, net accounts receivable, and short-term marketable securities are the quick assets in this case. Therefore, this answer is incorrect because the quick ratio is equal to 0.81 to 1 [($60 + $180 - $8 + $90)/$400].
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