Which of the following is the most stringent test of a company's ability to meet its current obligations?
A)Current ratio
B)Quick ratio
C)Debt-equity ratio
D)Times interest earned

Question

Quizplus · Accepted Answer

The quick ratio, also known as the acid-test ratio, is the most stringent test of a company's ability to meet its current obligations because it only includes highly liquid assets such as cash, marketable securities, and accounts receivable that can be quickly converted to cash. This ratio provides a better indication of a company's ability to pay its short-term liabilities than the current ratio, which includes all current assets. The debt-equity ratio and times interest earned are measures of a company's leverage and debt-servicing ability, respectively.

Which of the Following Is the Most Stringent Test of a Company's