quick ratio that is much smaller than the current ratio reflects

A. a small portion of current assets is in inventory.
B. that the firm will have a high inventory turnover.
C. that the firm will have a high return on assets.
D. a large portion of current assets is in inventory.

To determine the answer, we need to understand what the quick ratio and current ratio represent.

- Quick Ratio: This financial metric measures a company's ability to pay off its current liabilities without relying on the sale of inventory. It excludes inventory from current assets and calculates the ratio using only liquid assets (cash, short-term investments, and accounts receivable).

- Current Ratio: This financial metric measures a company's ability to cover its short-term liabilities using its current assets. It includes inventory as part of the current assets.

Now let's analyze the options:

A. A small portion of current assets is in inventory: If the quick ratio is much smaller than the current ratio, it suggests that inventories are not a significant portion of current assets. Therefore, this option does not align with the explanation.

B. The firm will have a high inventory turnover: The quick ratio and inventory turnover are not directly related. A high inventory turnover means goods are sold quickly, but it does not directly affect the quick ratio.

C. The firm will have a high return on assets: The quick ratio and return on assets are unrelated. The quick ratio does not provide insight into the firm's profitability or return on assets.

D. A large portion of current assets is in inventory: If the quick ratio is much smaller than the current ratio, it indicates that inventories make up a significant portion of current assets. Therefore, this option aligns with the explanation.

Therefore, the correct answer is option D: a large portion of current assets is in inventory.

D. a large portion of current assets is in inventory.

Look up the definitions of "quick ratio" and "current ratio". What is the difference?

The major difference in most companies will be the size of inventory as a current asset.

The quick ratio will always be smaller than the current ratio.

From that, you can just read off the answer.