The _____ is the ratio of current assets, less inventory, to current liability.
A) current ratio
B) debt ratio
C) acid test ratio
D) cash ratio

Question

Quizplus · Accepted Answer

The acid test ratio, also known as the quick ratio, measures a company's ability to meet short-term obligations with its most liquid assets, excluding inventory. It is calculated by dividing current assets, less inventory, by current liabilities. The current ratio (A) is calculated by dividing current assets by current liabilities and includes inventory. The debt ratio (B) measures the proportion of a company's total assets that are financed by debt rather than equity. The cash ratio (D) measures a company's ability to pay off all its current liabilities with its cash and cash equivalents.

The _____ Is the Ratio of Current Assets, Less Inventory