"Boom," went the cannon, as The Flying Garbanzo hurled over awed spectators and landed onto a safety net at the other end of the circus tent. The applause swelled as he bounced to the edge of the netting and flipped onto the sandy carnival floor.

"There's got to be a better way to make a living," he muttered under a forced smile, his arms stretched triumphantly above his head.

"Ladies and gentlemen," the ringmaster called out, "let's hear it again for the one, the only, the amazing, The Flying Garbanzo!"

The patrons rose to their feet. Garbanzo ran for the backstage area, glancing back to sneak a peek at Lorelei as she took to the trapeze. She was so beautiful. He envied her grace, and he longed for the moment when he might summon the courage to ask her out.

"She will never love me," he thought to himself.

"Don't be so sure of that," said Clara the Clairvoyant. "We're all freaks here."

"Get out," Garbanzo shouted, "Get out of my head and stay out!"

He ran off to his usual hiding place, a shady area behind the row of Port-a-toilets. He threw his aching body to the ground and stared up at the moon. There was no mystery, only misery.

"You can win her heart," a voice in the wind said.

"Clara?"

"Remember your dream, of taking Lorelei and running away with her," the voice went. "It's all possible if you heed my advice."

This was not Clara. Poor Garby did not know any better. If he did, he would have known right away that The Whisper had rolled into town. Still, curiosity got the best of the human bullet, and he listened, clutching at the grass on which he lay.

"You know all that money you have rolled up in that sock?" the voice continued. "It's not enough. She'll laugh at you. Your meager savings won't last more than three weeks outside of this amusement paradise."

Garby sighed. The voice was right. His modest hoard was not going to win the heart of Lorelei, the unmistakable enchantress who was swinging high above as Garby nibbled on a blade of grass.

"This is what you will do, Garby," the voice said, this time much closer, much quieter, more personal. "This is exactly what you will do. Take that sock to the bearded lady's husband. He is a stock broker. Empty out your savings on his desk, pick out the lint, and tell him to put it all in RED NOSE ENTERTAINMENT [Nasdaq: CLWN]. Ask around -- they provide all the props for your clown-faced buddies."

Garby had no clown friends. Even the elephants mocked him. His first cannon launch wasn't even intentional, just a janitorial prank gone bad. But he wanted Lorelei (he could hear the crowds cheering for her) and he knew he had to act fast.

"The best thing of all," The Whisper concluded, "is that while Red Nose may be showing red ink, they have a current ratio of three."

Just then a figure emerged from the shadows of the midway. It was none other than Motli Fool, fanning the air.

"Garby, first of all, you were wonderful," she told him. "That was an uplifting performance."

He rose to his feet and accepted a congratulatory handshake.

"But you know there is one major fallacy in using the current ratio alone to value the strength of a company. That is because the current ratio:

1) Includes inventory in current assets

2) Includes long-term debt in current liabilities

3) Excludes inventory in current assets

4) Excludes accounts payable in current liabilities

Enter your selection in the field to the lower right, and get immediate feedback on the answer!

Busted at the Big Top! The correct answer is #1. In a current ratio, which is simply current assets divided by current liabilities, inventory items are included as current assets. Now, this is not necessarily wrong, since inventory items are in fact, assets. Whether they are raw materials or finished goods, they are items that were paid for, and presumably are waiting to be sold.

Yet, what happens, as Garby later found out was the case with Big Nose, when inventory is obsolete? Big Nose has crates full of rubber turkeys that never quite took off, as well as an entire line of seltzer canteens, purple noses, really small shoes and really big car props. A respectable company would simply have written off the inventory, but Big Nose thinks fashions will change, and they want to corner the market when the rubber turkey sandwich becomes the laugh craze of the clown industry.

These inventory items are not the same as cold, hard cash and marketable securities. That is why the Quick Ratio, which is the same equation, but excluding inventory, is the better ratio to measure a company's liquidity.

Garby thanked Motli and raced over to find Lorelei, freshly finished and visibly exhausted from her performance. A more courageous Fool, he approached her on bended knee.

"Listen Lorelei," he said. "I've finally figured it out! I don't have much, just a sock full of petty cash, but I swear, you mean everything to me. Let's get away from this place. Town after town, tempting fate every single night for a payroll pittance. What do you say we settle down? You and me, circus stars to everyone else, love-starved creatures to each other. I'm beginning to learn to invest Foolishly. Wealth won't happen overnight but together we can make some beautiful things happen, this time at ground level. So, any words?"

She stared at him blankly. She wiped some sweat off her brow with her forearm and she held up four fingers.

"Four words," he said.

She nodded. "Beat it Bullet Boy!"

Garby turned away, saddened yet enlightened. He left the circus and went on to bigger and better socks. Ten years later, a much wealthier Fool, he bought the circus.

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