A quick ratio much smaller than the current ratio reflects

1) a small portion of current assets is in inventory.
2) a large portion of current assets is in inventory.
3) that the firm will have a high inventory turnover. 4)
that the firm will have a high return on assets.

physics nonsense.

The quick ratio, also known as the acid-test ratio, is a measure of a company's ability to pay off its short-term liabilities using its most liquid assets. It is calculated by dividing the sum of cash, marketable securities, and accounts receivable by current liabilities.

To determine how a quick ratio is affected by the proportion of inventory in current assets, you need to understand its components. The quick ratio excludes inventory because it is generally less liquid than other current assets and may take time to convert into cash.

Considering this information, the correct answer is option 1) a small portion of current assets is in inventory.

If the quick ratio is much smaller than the current ratio, it implies that inventory constitutes a significant proportion of a company's current assets. Since the quick ratio excludes inventory, when inventory makes up a large part of current assets, it decreases the numerator in the quick ratio calculation, resulting in a smaller ratio value.

Therefore, a quick ratio much smaller than the current ratio suggests that a substantial portion of the company's current assets is tied up in inventory. This can be an indication of potential liquidity issues, as it means the company may have difficulty quickly converting its inventory into cash to meet short-term obligations.

To calculate the quick ratio yourself, you can gather the company's financial statements and use the formula: Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities.