The acid test ratio eliminates from its calculation because it is considered the least liquid of the current assets.
A) debtors
B) government securities
C) inventory
D) bank bills

Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, focuses on the most liquid current assets that can be easily converted into cash to meet short-term obligations. Inventory is considered the least liquid current asset as it may take time to sell or convert into cash, hence it is eliminated from the calculation of the acid test ratio. Debtors (accounts receivable), government securities, and bank bills are all relatively more liquid than inventory and are included in the calculation of the ratio.

The Acid Test Ratio Eliminates from Its Calculation Because It