Which statement below best describes the quick (acid test)ratio?
A)The acid test ratio considers only the most liquid assets: cash,accounts receivable,and temporary investments.
B)The current ratio includes only the assets most easily converted into cash.
C)The acid test adds merchandise inventory and prepaid expenses in the computation of current assets.
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, considers only the most liquid assets that can be easily converted into cash, including cash, accounts receivable, and temporary investments. This ratio is a more stringent measure of a company's ability to meet its short-term obligations compared to the current ratio, which includes other assets such as inventory and prepaid expenses.

Which Statement Below Best Describes the Quick (Acid Test)ratio