Which asset is excluded from the quick ratio calculation?

• A. Inventory
• B. Accounts Receivable
• C. Cash
• D. Prepaid Expenses

Answer: (A)

The main idea is that the quick ratio measures immediate liquidity using only assets that can be quickly turned into cash to cover short-term obligations. The numerator includes cash, marketable securities, and accounts receivable because these are highly liquid and can be converted to cash quickly. Inventory is excluded because it may not be sold rapidly and its value can be uncertain or require price concessions, obsolescence adjustments, or longer time to convert to cash. Prepaid expenses are also not counted among quick assets since they represent prepayments rather than resources that can be quickly realized as cash. So the asset that is excluded from the quick ratio calculation is inventory.