An acid test (quick ratio)of 0.75 would indicate:
A)a ratio that would allow a company to pay off current liabilities with quick assets.
B)that for every $1 of quick assets, there are $0.75 in liabilities.
C)that for every $1 of liabilities, there are $0.75 in quick assets.
D)a ratio that would allow a company to pay off current liabilities with current assets.

Question

Quizplus · Accepted Answer

The acid test (quick ratio) measures a company's ability to pay off its current liabilities with its quick assets (cash, marketable securities, and accounts receivable). A ratio of 0.75 indicates that for every $1 of liabilities, the company has $0.75 in quick assets, suggesting it may not fully cover its short-term liabilities with its quick assets alone.

An Acid Test (Quick Ratio)of 0.75 Would Indicate