The question shown asks Wallace, a financial analyst, to calculate the quick ratio by removing the least liquid asset from the current assets section. The current assets mentioned include:

1. Accounts receivable
2. Inventory
3. Prepaid expenses
4. Cash and cash equivalents
5. Marketable securities

Each of these has unique liquidity features. For calculating the quick ratio, the goal is to assess a company's ability to cover its short-term liabilities without relying on less liquid assets like inventory and prepaid expenses.

The quick ratio formula typically excludes inventory and prepaid expenses because they are not as easily converted into cash quickly compared to other assets like accounts receivable, cash, and marketable securities.

Answer:

Wallace should likely eliminate inventory because it is generally the least liquid asset among the ones listed, making it harder to convert into cash quickly.

Would you like more details on liquidity and the quick ratio?

5 Related Questions:

1. What are the key differences between the quick ratio and the current ratio?
2. How is inventory considered less liquid than accounts receivable?
3. Why are prepaid expenses excluded from liquidity ratios?
4. How do cash equivalents and marketable securities contribute to a company's liquidity?
5. How can the quick ratio be used to assess a company's short-term financial health?

Tip:

Always review the liquidity of different assets when calculating ratios, as this will affect the outcome of your financial analysis.