A quick ratio result of less than 1 indicates what about a business's financial status?

A quick ratio result of less than 1 suggests that a business does not have enough liquid assets to cover its immediate liabilities. This ratio is calculated by taking the company's most liquid assets (current assets excluding inventories) and dividing them by its current liabilities. A quick ratio of less than 1 means that the company has less in liquid assets than it owes in short-term obligations, indicating potential liquidity problems.

When the quick ratio is below 1, it implies that if the business faced an immediate need to pay off its debts, it may struggle to do so, as it does not have sufficient liquid resources on hand. Therefore, this financial metric is a critical indicator of the business's ability to manage short-term financial commitments, and a low ratio could signal financial distress or inefficiency in asset management.

In contrast, a quick ratio of 1 or higher would indicate a more favorable situation, where the business is likely able to meet its immediate debts without relying on the sale of inventory. The other choices either suggest positive scenarios or mischaracterize the implications of a low quick ratio.