What is the target Quick Ratio according to the material?

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Multiple Choice

What is the target Quick Ratio according to the material?

Explanation:
Quick ratio measures a company’s ability to cover short-term liabilities using its most liquid assets, excluding inventory. In the material, the target value is 1:1, meaning quick assets equal current liabilities. This represents a balanced level of liquidity: enough to meet obligations without tying up excess capital in liquid assets. A higher target like 2:1 would be more conservative and reduce efficiency, while a lower target such as 0.5:1 would raise liquidity risk. Since inventory isn’t counted in the quick ratio, aiming for 1:1 aligns with the idea of having just enough readily available resources to cover what’s due now.

Quick ratio measures a company’s ability to cover short-term liabilities using its most liquid assets, excluding inventory. In the material, the target value is 1:1, meaning quick assets equal current liabilities. This represents a balanced level of liquidity: enough to meet obligations without tying up excess capital in liquid assets. A higher target like 2:1 would be more conservative and reduce efficiency, while a lower target such as 0.5:1 would raise liquidity risk. Since inventory isn’t counted in the quick ratio, aiming for 1:1 aligns with the idea of having just enough readily available resources to cover what’s due now.

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