The acid-test ratio is most similar to the:
A)Current ratio.
B)Debt to equity ratio.
C)Times interest earned ratio.
D)Inventory turnover ratio.

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, measures a company's ability to pay its short-term liabilities with its most liquid assets. It is calculated by subtracting inventory and prepaid expenses from current assets and dividing the result by current liabilities. The current ratio is also a measure of a company's ability to pay its short-term liabilities, but it includes inventory and prepaid expenses in its calculation. Therefore, the acid-test ratio is more similar to the current ratio than any of the other options listed.

The Acid-Test Ratio Is Most Similar to The