The acid-test ratio, also called the quick ratio, is a measure of a company's immediate liquidity and includes only liquid assets that can be quickly converted to cash.

Question

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The acid-test or quick ratio only takes into account a company's most liquid assets that can be easily converted to cash, such as cash, marketable securities, and accounts receivable, and excludes inventory and prepaid expenses. This ratio is used to evaluate a company's ability to meet short-term obligations.

The Acid-Test Ratio, Also Called the Quick Ratio, Is a Measure